Investment advice for a 10yr old boy

[kartikoli]

We know a family who are quite poor and they have a 10yr old kid so we wanted to pay 10k for kids future but that amount will be used if we just hand over the money to parents so we decided to open an account on boys name and do a FD, when he is 18 he can withdraw. Is this a best approach? I don't want to give his parents an option to withdraw else the money will be gone instantly.

Since the deposit is low (just one time 10k) I don't know if there are better options available.

P.S. Maybe we will pay a little more in future but lets not include that in current plan

 

[chetansha]

Post office schemes provide best rate on deposits.

 

[blr_p]

We know a family who are quite poor and they have a 10yr old kid so we wanted to pay 10k for kids future but that amount will be used if we just hand over the money to parents so we decided to open an account on boys name and do a FD, when he is 18 he can withdraw. Is this a best approach? I don't want to give his parents an option to withdraw else the money will be gone instantly.

Since the deposit is low (just one time 10k) I don't know if there are better options available.

P.S. Maybe we will pay a little more in future but lets not include that in current plan

My mother did that for some cousins of mine. The money at the end wasn't much. I think she put in Rs.2k and they would get it when they got married. It amounted to 30k odd. OR twice that since my uncle also did the same for the two kids. So both got 60k each.

Why give the money when he is 18? At 18 that money is going to get blown on anything and quickly. Hold out until he gets married. That is when money really is required.

What if it were in some blue-chip stocks? Is that option available?

 

[kiran6680]

Why give the money when he is 18? At 18 that money is going to get blown on anything and quickly. Hold out until he gets married. That is when money really is required.

Required? I personally know of thousands of weddings in India over just the last decade where 90% of the money spent was not actually "required" to be spent, and this includes weddings of some rather poor people.


At 18, at least the immediate big expense may be higher studies, if other things line up properly. Not that a person is awfully mature at 18. At a wedding, the immediate big expense may be khamba vs old monk vs Scotch, if not outright crimes like dowry. Nearly every Indian of every age becomes immature at a wedding.

Edit : one year after the wedding? Yeah, now one needs the money for basic expenses, all the money wasted at the wedding pinches now.

 

[kartikoli]

In this case higher studies won't be an option as he won't study (most probably). I was thinking maybe enough or a portion of money that will help him setup a small business like a chat corner or some repair shop of AC, electric or what ever his interest might be by then. 1L in 8~10yr should be the aim, that might not be enough but its something to start with.

What if it were in some blue-chip stocks? Is that option available?

No, in that case I will have to handle that account and we never know where he would be after all those years. I want to give him some papers that he can cash in after few years (keep these papers safe and visit xxx place when you are 18 and they will pay you money)

 

[jiith77]

Nifty etf would be the best option considering the age and risk.
Other options would be sgb and nsc.

 

[gourav]

1L in 8~10yr should be the aim

You want the money to multiply 10x in 10 years? That's a return of 26% per year. I don't know any instrument which can give that kind of return.

 

[kiran6680]

No, in that case I will have to handle that account and we never know where he would be after all those years. I want to give him some papers that he can cash in after few years (keep these papers safe and visit xxx place when you are 18 and they will pay you money)

Yes, convenience is of course most important. But I did a calculation : if you had Rs 100 in 1980 :

1. Put it in stocks of companies that later became part of sensex, replacing as sensex changes : in 2007 one would have Rs 21000, and after the great market crash of 2008, one would have Rs 7500

2. Every year, find the best FD interest rate and put money there : in 2008 one would have less than Rs 1500.

3. EPF: in 2008 one would have less than Rs 1900.

I was thinking maybe enough or a portion of money that will help him setup a small business

Yes, far more respectable use of money than a wedding.

 

[kartikoli]

You want the money to multiply 10x in 10 years? That's a return of 26% per year. I don't know any instrument which can give that kind of return.

How about if I double the amount since its for kids future and by God grace I can easily afford this one time investment also its fine if its 80~90k and not 1L exact amount. I just want to give him a chance to start a future.

@kiran6680 @jiith77 From your calculation it looks like Stocks are best option, Is it possible to buy stocks on his name (Assuming he doesn't have any documents) with a lock in period? My only concern is that his parents will withdraw the money in few months/year if they have an option.

His father goes to jungle and cut trees for a living so you can understand there situation, 500rs is a meal for 2~3 days for a family of 6~7 people so I won't blame them if they see an opportunity to get hands on ready cash but that defeats the purpose of kid future.

 

[jiith77]

How about if I double the amount since its for kids future and by God grace I can easily afford this one time investment also its fine if its 80~90k and not 1L exact amount. I just want to give him a chance to start a future.

@kiran6680 @jiith77 From your calculation it looks like Stocks are best option, Is it possible to buy stocks on his name (Assuming he doesn't have any documents) with a lock in period? My only concern is that his parents will withdraw the money in few months/year if they have an option.

His father goes to jungle and cut trees for a living so you can understand there situation, 500rs is a meal for 2~3 days for a family of 6~7 people so I won't blame them if they see an opportunity to get hands on ready cash but that defeats the purpose of kid future.

Doubt it. Kids are not considered legally capable to handle money , so a guardian is always involved in the transaction.

Edit: if the family has a girl child then ssy is an option

 

[kartikoli]

Doubt it. Kids are not considered legally capable to handle money , so a guardian is always involved in the transaction.

Edit: if the family has a girl child then ssy is an option

Then I guess we will have to explore other options, His elder sister is almost 16yr old now so she might get married in couple of years and the other girl is just few months old (Don't think planning that long is a good option as they might simply forget or loose documents in 20 years). This kid is mature and intelligent to understand that the papers that I am giving his parents are important and should be kept safe.

 

[gourav]

Doubt it. Kids are not considered legally capable to handle money , so a guardian is always involved in the transaction.

Edit: if the family has a girl child then ssy is an option

Yes, this is correct. In most cases, children under the age of 18 cannot have sole control of money, they will have to have a joint holder who is the legal guardian.

If the child is 8 years old, I also doubt that the child will be able to understand the statement "keep this paper safely and take it to X bank when you turn 18". Most likely, they'll not remember where the paper is one week later. Children don't understand the importance of money and papers.

A better plan would be to properly inform the parents and tell them that the money can be withdrawn only when the child turns 18. If you don't tell them they can withdraw, I doubt they'll find out on their own. And assuming they are reasonably responsible parents, they will be happy that their child has some fallback money when he needs to go looking for a job. Most parents want to invest for their children's future.

Opening demat and buying stock will be problematic since all companies charge an Annual Maintenance Fee, especially if there are no transactions. So the account can get locked in 10 years. It will also need a bank account to be linked and KYC to be done. Mutual funds are also not an option as there is no option to gift MF units in India and it's illegal to fund mutual fund investments through third-party account. The bank account holder and MF investor should be the same person.

While your intent is good, it's very difficult to do what you are trying to do. Here's the easiest solution:

1. Invest some money under your name for him
2. Tell him to keep in touch and contact him once at least once a year
3. When he turns 17, tell him you have a gift for him on his next birthday and he should contact you on turning 18

Sadly, that's the most feasible plan.

How about if I double the amount since its for kids future and by God grace I can easily afford this one time investment also its fine if its 80~90k and not 1L exact amount.

For 20k to quadruple to 80 in 10 years, you need returns of 15%. This too seems pretty high. Invest in a good multi-cap fund and you just might get there. Kotak Flexicap has returned 16.3% in the last 10 years. Mirae Emerging Bluechip has returned 22.7% (but doesn't allow lumpsum investment). So it is possible.

 

[nRiTeCh]

Required? I personally know of thousands of weddings in India over just the last decade where 90% of the money spent was not actually "required" to be spent, and this includes weddings of some rather poor people.


At 18, at least the immediate big expense may be higher studies, if other things line up properly. Not that a person is awfully mature at 18. At a wedding, the immediate big expense may be khamba vs old monk vs Scotch, if not outright crimes like dowry. Nearly every Indian of every age becomes immature at a wedding.

Edit : one year after the wedding? Yeah, now one needs the money for basic expenses, all the money wasted at the wedding pinches now.

Correct! In India people prefer WASTING money in swanky weddings just to show-off their capabilities of spending/arranging such big fat weddings and even poor will sell kidneys for some lavish weddings when such money should be invested in education or businesses.
And families and couples realize this thing only when they are in severe financial crisis but by that time everything is late and they live peanuts..

 

[TEUser2K1]

https://www.valueresearchonline.com/videos/watch/51680/which-is-the-best-child-investment-plan/

 

[gourav]

In India people prefer WASTING money in swanky weddings just to show-off their capabilities of spending/arranging such big fat weddings and even poor will sell kidneys for some lavish weddings when such money should be invested in education or businesses.

While context is important and I personally don't support spending beyond ones means on weddings, one should remember that weddings are businesses. People want big fat weddings because many people have invested in those businesses. And millions of people also earn their livelihood from these businesses.

Whenever people say "waste money on weddings", I wonder what their plan is for people who depend on weddings for their livelihoods. Wedding photographers, caterers (cooks and servers), decorators, make up artists, event planners, weavers, garment manufacturers, costume jewellery makers, etc. etc. Should all of these people go out of job? Whom would it really benefit if people stopped spending on weddings? How would the money saved benefit the economy and society?

There are many things about which we can say the same. Every discretionary expense can be counted as a wastage. Why do people buy 65" TVs when a 43" TV shows the same images? Why buy 4090 when a 3060Ti runs most games just fine? Why do people spend 50k on Beyer dynamics headphones for marginally better quality compared to a boat headphone?

On a forum full of people who own lots of expensive gear which they hardly use, buying which only benefits super rich western corporations, it's really hypocritical to criticize weddings as a waste of money, when those weddings provide jobs to millions of poor and middle class people in India.

 

[kiran6680]

While context is important and I personally don't support spending beyond ones means on weddings, one should remember that weddings are businesses. People want big fat weddings because many people have invested in those businesses. And millions of people also earn their livelihood from these businesses.

Whenever people say "waste money on weddings", I wonder what their plan is for people who depend on weddings for their livelihoods. Wedding photographers, caterers (cooks and servers), decorators, make up artists, event planners, weavers, garment manufacturers, costume jewellery makers, etc. etc. Should all of these people go out of job? Whom would it really benefit if people stopped spending on weddings? How would the money saved benefit the economy and society?

There are many things about which we can say the same. Every discretionary expense can be counted as a wastage. Why do people buy 65" TVs when a 43" TV shows the same images? Why buy 4090 when a 3060Ti runs most games just fine? Why do people spend 50k on Beyer dynamics headphones for marginally better quality compared to a boat headphone?

On a forum full of people who own lots of expensive gear which they hardly use, buying which only benefits super rich western corporations, it's really hypocritical to criticize weddings as a waste of money, when those weddings provide jobs to millions of poor and middle class people in India.

The Broken Window Fallacy: Definition and Examples in Economics

The broken window fallacy is a parable that is sometimes used to explain the problem with the notion that waging war is good for a nation's economy.

www.investopedia.com

The people in those industries can work on something productive.

 

[kartikoli]

I think the easy option for me would be to open a joint saving account and leave as it is, then add another 10~20k after an year but I guess even with 30k upfront money it will only go somewhere around 50k.

Correct! In India people prefer WASTING money in swanky weddings just to show-off their capabilities of spending/arranging such big fat weddings and even poor will sell kidneys for some lavish weddings when such money should be invested in education or businesses.
And families and couples realize this thing only when they are in severe financial crisis but by that time everything is late and they live peanuts..

I know someone very close to me who spent big when they couldn't afford, Even I lost around 6L and now they are not in a position to return (I can't ask for money due to immense family pressure)

 

[nRiTeCh]

Whenever people say "waste money on weddings", I wonder what their plan is for people who depend on weddings for their livelihoods. Wedding photographers, caterers (cooks and servers), decorators, make up artists, event planners, weavers, garment manufacturers, costume jewellery makers, etc. etc. Should all of these people go out of job? Whom would it really benefit if people stopped spending on weddings? How would the money saved benefit the economy and society?

Such careers are for those who plan for the segment class who can splurge and these people can make the most of it!
Cooks have ample of options btw...be a prof. cook, join hotels, start your own kitchen etc.
Artist have never ending options again....
Garment mfgs dont depend only on weddings btw. Weddings garments only comprises of 20-23% of the entire clothing industry.
& so rest all the people/ jobs you mention..

Why do people buy 65" TVs when a 43" TV shows the same images? Why buy 4090 when a 3060Ti runs most games just fine?

65" or any size has viewving science behind it. If room is large enough then investing in big sizes makes sense else there are common people who barely watch from 4 meters and use 65"...sheer stupidity!

Why do people spend 50k on Beyer dynamics headphones for marginally better quality compared to a boat headphone?

50k or 5lac headphones are for pure professionals who work in audio industry and professionals DJs. Now when someone among us spends on them either he just wants to splurge having deep pockets, stand out of the crowd or feel anything under 50k is too cheap for his status or considers himself /is one of those audio enthusiast!

it's really hypocritical to criticize weddings as a waste of money, when those weddings provide jobs to millions of poor and middle class people in India.

What if tomorrow a new business/career is discovered about beautifying your drainage/gutter line/toilet sink? Will you invest in it?