You have been earning for a while now and are well-settled within your budget and needs. The first people you think about apart from yourself are your parents and their needs. And yes, it is not easy to take care of someone who brought you into this world and held your finger at every step. Yet, you can only try with different aspects of their needs – medical care, being there for them, and taking care of their finances.
Why you should help out financially
A father does not like to be dependent upon his children. But you also know the increasing cost of living and medical expenses. Take the following aspects into consideration before making an investment in your father’s name.
Safety of investment – Taking a safe approach without loss of capital is the key for an investment for your father. He can be assured of the steady value and flexible features which will help in preserving the investment and also provide opportunities to use it when required. You can invest Rs. 5 lakhs in specific high-growth stocks or mutual funds. But these do not fulfill this requirement which is essential to a person above 50 years of age.
Consider risk appetite – Your father is most probably nearing his retirement and looks forward to having investments in line with his risk appetite. His number of working years might be less or he might be retired. A financial loss at this juncture is the last thing both of you would want. This should cut out stocks and equity mutual funds out of consideration. This leaves the post office and small saving schemes and Senior Citizen Saving Schemes (SCSS). He probably already has a PPF account nearing its maturity. You are not left with too many risk-less options except fixed deposits.
Medium to high returns – Rs. 5 lakhs is a solid capital to build a decent corpus on. With SCSS and fixed deposits, consider the option which gives him ease of investment, benefits in taxation and higher returns.
Features of SCSS
- SCSS has quarterly interest fixed which changes next quarter per government announcements
- It was 8.7% for Jan-Mar 2019
- It can be opened through post offices or public and private banks
- It has a tenor of 5 years with a possible extension of 3 years
Better option than SCSS
An even better option is a company fixed deposit which offers interest rates 1-2% higher than most banks.
Banks are currently offering a maximum of 7.95% for 5 years or longer. Company FDs like Bajaj Finance is offering 8.95% to senior citizens for the same tenor. In case your father is not yet a senior, he can still avail a high rate of 8.60% over a 5-year tenor.
If you go for a 15-month tenor, you can look at 8.05% interest.
Thus, going for a Bajaj Finance FD in your father’s name seems to be the most lucrative option which fulfills all the criteria above.
Features of Bajaj Finance Fixed Deposit
Apart from the high-interest rates, your father can avail the following benefits as well –
High ROI – The return on investment (ROI) on a senior citizen FD at 8.95% for Rs. 5 lakhs is 54%. As the following table shows, even if he a new customer under 60 years, he can earn a 51% ROI. And if he chooses to renew for the same 5 years, he will still earn 53% ROI. These are higher than most FDs and even market-linked instruments.
|Investor||Interest rates||Principal Amount||Tenor||Interest Amount||ROI|
|New customer||8.6%||₹5 lakhs||5 years||₹2,55,299||51%|
|Senior citizens||8.95%||₹5 lakhs||5 years||₹2,67,549||54%|
|Existing customers||8.85%||₹5 lakhs||5 years||₹2,64,033||53%|
Ease of investing – At an age where you would want your father to avoid frequent visits to the bank to invest and withdraw, a simple form with scanned documents can help you create Bajaj Finance FD online. You can also use the online FD calculator to seek out the maturity amount.
Liquidity – If you want an option where your father can get quick cash, 75% of loan against this FD is possible. He can also go for the non-cumulative option which will give him a monthly payout for his use.
Thus, a simple FD can work wonders with the right tenor and features. Make sure your father gets the best option possible.