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Do you thinks that there are more important things to worry about than bothering about managing your own money. Like how the Finance Minister is handling the Nation's budget. Saving where he should spend and spending where he should save! Or how RBI is managing the monetary policies for the country. Or the Sub prime mess that is raising a stink in the US (and worldwide).

And if you are done with that, you need to worry about your Company's finances. Whether the capital is enough and accounting ratios are on the right track. And we have complex financial statements and models to keep us informed about the financial health of the company.

So where does handling my own money stand in the pecking order? You need to answer that for yourself. And that's why it's called personal finance, I guess!

Economy

Second Quarter Review of Monetary Policy 2009-10

The RBI announced its Second Quarter Review of Monetary Policy for the Year 2009-10 today and as expected, has left the key rates unchanged. Though the RBI kept key rates unchanged, it hiked Statutory Liquidity Ratio (SLR), the deposits that commercial banks are to park in government securities, by one percentage points to 25 per cent.

While this should have brought some cheer to the markets, they plunged deeper into the red not only because the RBI looks set to raise interest rates going forward, but also because the central bank has upwardly revised its target inflation by March 2010 end to 6.5% from 5% earlier.

The upward bias in interest rates was apparent from the RBI's move to hike the statutory liquidity ratio (SLR) to 25% from 24%. Having said that, whether interest rates in the future rise or not will depend on whether the inflation continues to rise the way it is doing now, and the economic momentum continues to pick up pace.

Editor's Choice

Do you want to appear rich, or do you want to be rich?

You probably can’t be both.

Many, many people choose to appear rich. This usually means buying a house you can’t really afford, cars you can’t really afford, and all sorts of electronic devices and jewelry and other items that you can’t really afford. Outwardly, you appear to have lots of money, but you’re actually sinking in a giant pile of debt, barely able to keep your head above water.

HDFC Young Star Super – Product Review

Written by Gopal Gidwani

Monday, 11 January 2010 07:25

Every parent aspires to give the best of everything to their children; be it primary education, a good quality lifestyle, secondary education, lavish wedding etc. Child plans of most insurance companies play on this emotional aspect to push their products. Every parent’s top priority is to fulfil his child’s future dreams and aspirations.

HDFC Standard Life recently launched a new child plan – HDFC YougStar Super. Let us explore the features of this product. As per the company brochure the following are the details:

Minimum Age at Entry	18 Years
Maximum Age at Entry	65 Years
Minimum Term of the Policy	10 Years
Maximum Age at Maturity	75 Years
Minimum Premium Amount	Rs 15000

The policy is complaint with the ‘cap on charges’ guidelines for ULIP products issued by IRDA.

Death Benefit

In this policy the insurance cover is in the name of the earning parent rather than the child. The policy offer a choice of 2 options to select from in case of unfortunate death of the parent

1. Double Benefit: Under this option if the life insured (parent) dies the company will pay the sum assured to the beneficiary. Thereafter the company will waive off all the future premiums to be paid by the family. The company will continue paying 100% of all the future premiums payable towards the policy as and when due, on an annual basis.

2. Triple Benefit: Under this option if the life insured (parent) dies the company will pay the sum assured to the beneficiary. Thereafter the company will waive off all the future premiums to be paid by the family. Thereafter the company will continue paying 50% of all the future premiums payable towards the policy and 50% of the premiums will be paid to the beneficiary as and when due, on an annual basis. The 50% premium amount is paid to the nominee to ensure regular income for the family to meet the regular expenses.

Premium Allocation

· In the first year the premium allocation is 85% for a premium of Rs 15000 – Rs 1,99,000. The Premium Allocation Charge in the 1^st year is 15%. This is still high when compared to similar products in the market like Aegon Religare Invest Maximiser Plan which charges only 5% PAC in the 1^st year.

· In the 2^nd Year the premium allocation is 90%

· In the 3^rd Year the premium allocation is 95%

· And from the 4^th year onwards the premium allocation is 97%

The Fund Management Charges are 1.25% p.a. charged daily on the fund’s value

The Policy Administration Charges are Rs 50 per month which will be increased by 5% every year. The policy administration charges are Rs 40 per month (5% increase every year) for Aegon Religare Invest Maximiser Plan.

Bumper Addition

On maturity; along with the fund value the company will also pay a bonus. This ‘bumper addition’ will depend on the original term of the policy. If the policy term is for 10 years then the bumper addition will be 50% of the original annual premium. If the policy term is for 10+ years then the bumper addition will be 100% of the original annual premium. But the bumper addition will be payable only if there are no partial withdrawals during the term of the policy and all regular premiums have been paid as per the policy terms.

Other Features

· The company offers 7 funds to select from, where the premium after deducting charges can be invested. These funds offer to invest from 100% in debt to 100% in equity depending on the investor’s risk appetite.

· The premium can be paid yearly, half-yearly or monthly.

· There are 24 switches allowed free in a year.

· The policy holder can choose the sum assured between 5 to 40 times of the annual premium.

· The life insured can also avail the critical illness rider with the policy.

· Premium paid is eligible for tax deduction under Section 80C. The death benefit or the maturity benefit received is tax free under Section 10 (10D) of the Income Tax Act.

Conclusion

While the overall features of the policy are good investors should opt for insurance only for pure risk cover and invest the remaining investible surplus amount into other investment products like normal mutual funds or ELSS plans, instead of insurance. Individuals should avoid mixing insurance and investments. In the process of doing so you are foregoing an opportunity of investing your surplus money in alternate investments which can earn you comparable or even higher returns. It is an opportunity cost. Also don’t treat the money paid for pure term insurance premium as an expense. View it as an investment to protect your future monthly income or protect your family from financial problems in case something unfortunate happens to you.

This article is written by Gopal Gidwani. He can be contacted at This e-mail address is being protected from spambots. You need JavaScript enabled to view it for any queries on Financial Planning, Tax Planning and Investments. He is an qualified Associate Financial Planner (AFP) in Investment Planning, Tax Planning, Insurance Planning and Retirement Planning

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