This Bhai Dooj Gift Your Siblings Financial Freedom

Time to read: 4 mins | November 1, 2018

Bhai-Dooj or Bhau Beej observed on the last day of Diwali is a ceremony symbolic of the brother-sister bond.

Amidst all the diyas, fireworks, Diwali savouries and revelry, this occasion is celebrated where sisters invite brothers to perform aarti ­followed by a sumptuous meal. In return, the brother blesses the sister and exchange gifts.

This Diwali if you’re looking at gifting options, consider something unconventional, smart and present your sibling/s with the diya of financial freedom.  

Here are a few options:

1. Consider gifting gold the smart way –

   Gold, as you know, has immense emotional value in the heart of Indians. It is an asset passed on through the generations and strengthens family bonds. In fact, gold is symbolic of Goddess Lakshmi; it is looked up to as a store of value; it can act as a hedge during economic uncertainties and has been an effective portfolio diversifier.

But this Bhai-Dooj instead of physical gold (bars, coins, jewellery) consider gifting gold the smart way- in the form of gold ETFs, gold saving funds, and/or Sovereign Gold Bonds (SGBs).

Gold ETF is an open-ended exchange traded fund (offered by mutual funds) which tracks the price of gold and each unit represents ownership of the gold asset. Each unit of gold in the gold ETF that you buy is equal to 1 gram of gold (some mutual fund houses also offer 1 unit at 0.5 gram of gold). However, the gold is held on your behalf by an appointed custodian for the ETF.

Gold ETFs can be purchased on the stock exchanges (demat and share trading account is a must). And when you buy gold ETF, you get a contract indicating your ownership in gold equivalent to the rupee amount of your investment.

A gold saving fund (also known as a gold fund), on the other hand, is a kind of ‘fund-of-fund’ scheme that invests its corpus into an underlying Gold ETF, which benchmarks the performance against the physical prices of gold. It attempts to provide returns that closely correspond to the returns of its underlying Gold ETFs. 

Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold (1 gram and in multiples thereof) and come with a tenure of eight years. The bonds are issued in denominations of 1 gram of gold and in multiples thereof. These are tradable on the exchange. 

During the holding period, your sibling/s can earn interest @2.50% p.a. (fixed rate) on the initial amount in SGBs. The interest is credited semi-annually to your bank account and the last interest will be payable on maturity along with the principal. How your investment fares is based on the movement of gold.

On maturity, i.e. eight years, SGBs can be redeemed in Indian rupees. The redemption price is based on the simple average of the closing price of gold (of 99.9% purity) of the last three business days from the date of repayment published by the India Bullion and Jewellers Association Limited.

All the above options are, of course, paper forms of investing in gold. But here are the advantages:

• Convenient to invest in gold at prevailing market price (No premiums involved as in case while buying physical gold)
• You need not worry about storage and security aspects
• There’s no question as regards the quality
• Compared to physical gold, the cost of holding gold in paper form is low
• Ensures high liquidity: it can be easily sold in time of need, at the prevailing market price without questioning the quality
2. Gift a SIP –

   We all have financial goals — be it buying a house, an expensive gadget or vehicle, travelling for leisure, among a host of others. And to accomplish these, Systematic Investment Plans (or SIPs) in worthy mutual funds can go a long way –– particularly at a time when inflation is eroding the purchasing power of our hard-earned money.

A SIP is a contemporary and effective mode of investing in mutual funds. It facilitates investing a certain sum of money regularly–––say monthly or quarterly –––instead of all in one go, allowing one to simultaneously plan for many financial goals. 

SIPs are lighter on the wallet, help to mitigate the risk involved (as they facilitate rupee-cost averaging), and can offer the power of compounding to add to financial security.

But when you gift a SIP try to take a sense of what your sibling/s may be looking at, whether: growth, income, or preservation of capital. 


3. Buy a health insurance cover –

   Today’s lifestyle invites higher risk to the health of our loved ones. Hence, if you can gift your sibling/s a health insurance policy and pay his/her premium, particularly if they are dependents, it would truly be a valuable and unforgettable gift.

4. Fund his/her education –

   If your sibling/s is pursuing his/her education and is a dependent, it would be sensible to contribute to his/her education. This exceptional gesture could be of support even to your parents. Financially supporting their education could mean paying for a hobby class or even a vocational course that interests them.

5. Help pay-off liabilities and restructure debt –

   This again, to whatever extent you can is an exceptional act of kindness and will be a relief for your sibling.

Besides, help restructure the liabilities, and if you don’t possess the competence, guide him/her to a credit counsellor or a financial guardian, pay the professional fee, who can then pave a corrective course for them to follow in the interest of their long-term financial wellbeing


6. Add-on Credit Card –

   This can be a good choice to gift your sibling/s if they are dependents. But when you gift an add-on credit card, clearly explain how to use it thoughtfully to avoid falling into a debt trap.Perhaps, it would be sensible to introduce a credit card with a lower credit limit, which can be used for whatever expenditure and even in case of an emergency.

An add-on credit card would introduce your sibling to credit management and its importance for a healthy and better credit score (which reflects credit behaviour and creditworthiness).


7. Present a Gift Card –

   Gift cards are prepaid cards offered by banks and widely accepted today at merchandise outlets and online shopping portals. If you are unsure of what your loved ones may prefer, a Gift Card can be a smart choice.

A gift card will provide your sibling/s with the liberty to buy what he/she likes from a select store.

To sum-up…

These thoughtful gifts will not only be cherished, these add to the financial security and financial freedom of your sibling/s.

So, be a positive change in the life of your siblings; brighten up their financial future and strengthen the bond this Bhai Dooj or Bhau Beej.

“A gift consists not in what is done or given, but in the intention of the giver or doer.” – Lucius Annaeus Seneca.

Happy Gifting!

Wish you a Very Happy & a Prosperous Diwali.

Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm known for offering unbiased and honest opinion on investing. Axis bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.