What every SIP Investor is missing
You may be building wealth through your SIPs. But there’s something you may be missing, no matter where in life you are.
People now have smaller families but bigger aspirations. In today’s economy you can build wealth a lot more quickly than your parents used to. Investments such as SIPs allow you to pay for you house, for your kids’ education and for your own retirement. However this wealth creation and the utilization of it to meet these (once unattainable) goals also increase the risk of financial disaster for your family, if you pass away prematurely. Leaving your family to deal with EMIs or tuition fee installments can be disastrous.
The solution is both affordable and elegant. It applies no matter what stage of life you’re in.
Started first job. Started SIP. Is it enough?
Starting your first job and living by yourself or with flatmates for the first time is quite a thrill. Your first salary brings a great sense of freedom. You may have also started your first SIP and the magic of compounding is at work. However here, you have a choice. You can either go through your early years without preparing for the future, or you can prepare. You may one day have to support a family or aged parents and your untimely death can devastate them emotionally and financially. You may also have educational loans, that your parents have guaranteed or are paying off. So how do you prepare? We feel you should scroll down and see ‘The solution’ below.
An SIP may secure your goals. What about your wife?
Marriage can be the source of great joy and companionship. However, it also comes with responsibilities. Another human being now depends on you and has tied her future to yours. Your SIPs may have grown to a tidy sum and will pay for your first home. However the risk of it all coming apart, if you are no more, has also grown exponentially. You may or may not change the bulbs around the house, but failing to provide for your significant other can cause the lights to go out in her life, for a long time. So how do you put this protection into place? We feel you should scroll down and see ‘The solution’ below.
You are a Family man. But will SIP alone secure your child’s education?
You can never forget the butterflies in your stomach when you held your baby for the first time. And as your baby grows your responsibilities grow even more at home and work. Typically this period brings intense career growth. You get salary hikes. You get sent on assignments to other cities or even abroad. You also have to look after and nurture a growing family. Your SIPs help you do this, having gone on for a while and become a decent sum. They will let you pay for everything from your kids’ education to holidays and home refurbishments and retirement. But these SIPs still need your income to keep going and your death will cause them to cease. How do you protect your kids, then? We feel you should scroll down and see ‘The solution’ below.
How about tying your term insurance premium (TIP) to your monthly SIP? Term insurance is insurance in its purest form – paying out only in case of your death. As a result of this premiums tend to be low and ideal for a tight monthly budget. Paying a term insurance premium, every time you put money into a SIP builds protection as you build wealth. We recommend to place 10 rupees into a premium for every 100 rupees of SIP.
Have you heard the children’s story ‘The Three Little Piggies?’ In it, the first pig builds a house of straw and the big bad wolf blows it down. The second pig builds a house of wood and the big bad wolf blows it down. The third pig, however builds a house of bricks and the despite ‘huffing and puffing’, the wolf simply cannot blow it down. The wolf finally attempts to get in through the chimney, only to fall into a pot of boiling water that the pig has put there.
Paying for term insurance plan (TIP) with your SIPs will let you build this house, brick by brick.