Mint, along with the Hindustan Times and NDTV, brings you a personal finance show called Let’s Talk Money. The weekly call-in show, anchored by Monika Halan, editor, Mint Money, and Manisha Natarajan, editor and senior anchor, special programmes, NDTV, aims to answer viewers’ questions about money-linked issues. This is an edited transcript of the show that was aired over the weekend on NDTV Profit and NDTV 24x7.
Natarajan: Our two-part special on mis-selling by banks drew a huge response... While regulation should come in not just for banks but for financial advisors as well, till stringent penalties are put in place for mis-selling, it will not stop. So, we urge you to do your due diligence before investing anywhere... And now, let’s talk money and resolve some of your money issues...
Shelly Khedka, 42, self-employed, Mumbai
Where do I ask my most basic doubts about money management from an Indian perspective? I have slowly come to rely on articles/blogs, which demystify the same for me, but I still get lost. What are the basic, practical and user-friendly money management/financial planning skills and where do I learn the same, so that I am not inundated with financial jargon and words, which confuse and scare me?
Halan: I think women and money are slightly at odds. One of the challenges is to get women over that bump, which says: “I don’t understand money.” There are simple thumb rules you can use. First, you need to make the financial products work for you and not the other way round. You will have to figure out what you need. How do you do that? Most people keep money in the savings deposit for an emergency. Usually it is a medical emergency that we worry about. The first product to buy is a medical cover; you are looking at Rs 2-3 lakh per head, you are buying simple plain vanilla health cover that covers your hospitalization. The second product for families is simple term life cover that is about seven to 10 times your annual income. For investments, those with EPF (employees’ provident fund) must maximize their provident fund. You do 12% and your employer gives you 12%—24% of your basic has gone to work. For a self-employed person like you, you need to do the same thing in the NPS (New Pension Scheme). Maximize the PPF (public provident fund) saving and you have your basic risk-free portfolio working for you. Now you build your equity corpus. Now you fix the savings target. The mistake that all of us do is we try to get into budgeting too much. Figure out, after all your commitments are over, what are big potatoes, like I can save about Rs 20,000 a month. If you can do 20, then come to products.
Natarajan: That’s the basic guide we tell to everyone. When you are looking at equities, what you do, you diversify, you don’t commit large amounts in one go. You also make a savings target as Monika has said and don’t think that you can become a billionaire overnight. Never invest in something that you don’t understand...
Ali Zeeshan, 20, student, Ranchi
Here are my questions:
1. What will happen to health insurance after Dad retires from his office after four years? Does Punjab National Bank cover cases for critical illness for now?
2. I need some money for my MBA (masters in business administration) after a year and a half. Please advise me how do I meet the expenses with these earnings without going for a education loan. Paying interest is going to get tougher, I believe, with the kind of credit policy, owing to inflation, RBI (Reserve Bank of India) is dealing in.
3. Also, I might go on to get a hair transplant done and that doesn’t come under any purview, either insurance or reimbursement through Dad’s office. What should I invest in so that I can accumulate around Rs 2 lakh for that?
Halan: Your parents do need medical cover. It’s a good idea to buy it now; getting a medical cover at an advanced age is difficult. So you please get into a cover now, at least Rs 2 lakh each of cover. You are young and India is growing at 8-9%. I don’t know why a high interest rate should be a deterrent towards doing what you will do to your future. You shouldn’t be looking at money within the family to fund this. Take that loan and have that confidence of repaying it, and also look after your parents once you start working.
Natarajan: You should not be dipping into any savings of your parents at all. Education loans come so easy from the PSU (public sector undertaking) banks, and you are looking at Rs 70,000 corpus for 18 months. That’s not long enough a period to look at equity funds, so you look at dynamic funds.
Ali: Can I know what this Rs 5 lakh family floater cover means? Will it cover the whole family?
Halan: If you take it, your immediate family—your parents, your spouse—will be covered, and if your father takes it, it will cover your mother and all siblings...