The Best gift for our Children

We all want to give best of the world to our kids. It stars with toys and small things and goes on for their bigger items like laptops, gaming console, bike and car and so on. But as well all know that these items become redundant/ outdated shortly there market value also goes down significantly and needs to be replaced with new version of the items. So what can we give to our kids which does not get outdated and they can use it when they really need it and best of it that its value keep will still keep on growing?

Before getting into the details of that lets understand another perspective of our working life.

There are basically two type of work; either we work for our self which is called as business/ entrepreneurship or we work for others which is called as job or employment.

1. So what is the difference between a Business Person/Entrepreneur and an Employee?

The basic difference is the opportunity business person/entrepreneur can offer for the next generation.

Let us understand it more…

An employee starts his journey at a junior level and works his way up to a senior position and then retires at 55 to 60 yrs.

An Entrepreneur also start his journey from zero and with a lot of struggle and efforts grows his way up. However he has a choice whether to retire or not till health permits.  

As we can see that both of them have worked hard but the entrepreneur has created assets that will continue to generate income even in his old age and more importantly, he has created a strong base for the next generation to take over and make it bigger. The kids of the entrepreneur will not have to struggle like his father and don’t need to start from zero but from where their father left and can make it grow more.  But the next generation of an employee will have to start again from the scratch as his father did and will have to go through all the struggle before they can attain financial freedom.

2. What is the main worry for an employee?

As we can understand one of the biggest worry for an employee is retirement. While we should plan our retirement/financial freedom, we can also gift this financial freedom to our next generation as well so that they will not have to worry about retirement planning and can live life to the fullest.

That is why it is important for all of us to create assets that could generate passive income even while we are not working. Passive income is like interest income, dividends from stocks/mutual funds, rent from commercial or residential property, Royalty etc. which can then be passed on to the next generation.

3. So how can we gift the financial freedom to our kids?

Here is one simple way to do it…

For example if our monthly expense is 50-75k today and we had a corpus of Rs. 1.5 cr. in a balanced fund which can give 10-12% annual return, Then we can withdraw 50-75K per month allowing our principle of 1 cr to grow at 5-6% annually. So, it’s safe to assume that a 1.5 cr corpus today can take care of our financial needs and can get us financial freedom.

Let’s assume our child who is 10 years old now has 45-50 yrs before he/she retires. If we assume an inflation of 7-8%, considering a benchmark of 1.5 cr retirement fund today, the retirement fund needed for your child will be approx. 20 Cr.

So that’s our goal. If we can plan for this now…our children will not have to go through the worry and struggle of retirement planning. Imagine if our parents had done this for us…wouldn’t our life be a little different? And it’s not the Will, it is the knowledge and opportunity…which they didn’t have…but now we have it and we can utilise it for best of our use…

4. How to create such a huge corpus?

 
An 8.5 lakh invested with a fund which can generate a 13% annual returns… will become 20 Cr in 45 years. Now…if we don’t have 8.5 lakhs, there is another way out…Let’s start a monthly SIP of 10000 for 5 yrs and then leave that amount for 45 yrs…we will have our 20 Cr by that time.

Yes, It’s that simple….we just need to spare 10K/month for 5 yrs and it would have taken care of our child’s retirement…they will not have to worry about it in their life time. If we teach them to do the same, our future generations will remember us for a long time even after we are gone….

This could be one of the best gifts that we can give to our child.

Financial freedom actually means the freedom to do things we want to, its gives us the freedom to work for our self, travel the world, spend more time with family, do things that we love etc … It is something beyond the worries of earning and preserving money, and yes we can achieve it  easily with some smart and early planning.