Indian households love to give. Weddings, housewarmings, naming ceremonies and festivals all involve gifts, and the white metal has long been a favourite. Families who once bought only coins and utensils are now asking about the Best silver ETF in India, and some glance at the Nippon Silver ETF share price before deciding how much to set aside. With a little planning, the same generosity that fills celebrations can also build lasting wealth.
The Tradition of Giving
Giving a silver coin to a newly-wed couple, or an idol to a new home are great traditions to keep. They help to strengthen relationships, and make it so special to have those milestones.
However, spending can quickly add up. A family could spend quite a bit in giving gifts over the course of a decade. This can often include making costs and retailers profiting. The recipients will rarely sell these items so little of the money will be returned.
Differentiating Between Gifts & Investments
Firstly decide how much you want to spend per year on giving physical gifts. This should be classed as a cost, so no guilt about putting this in your budget.
Then decide on how much money to set aside for creating wealth. Invest this in something that has low costs, is easily valued and can be easily sold. Units backed by bullion will work as they are held by a custodian, valued every day and traded on the exchange. No making costs will apply.
Create a Family Gift Fund
A good idea would be to save a bit each month in a gift fund or investment. When someone gets married or during a festival you can use the money from this fund to give them a physical gift. Any remaining money will continue to grow. Alternatively you can give them a small physical gift and a note explaining that a small investment has been made in their name (within the rules).
Work out how much you spend annually on gifts for festivals and weddings.
Split this into 12 monthly payments.
Invest some of this regularly in a regulated listed product.
By doing this you create a predictable habit of spending.
Educate Younger Family Members
Children learn by watching. When giving a coin as a gift from a grandparent explain why these metals have been valued for centuries. If you are investing regularly show a teenager the statement and explain that the units represent real bullion which is being stored safely by a custodian.
This creates a basic understanding of finance without any teaching. It also helps to remind them that wealth can take many forms.
Compare Funds
Look at the expense ratio, tracking error, volume of trade and the fund house reputation. Use limit orders to control the price. Open a demat and trading account with a registered broker. Complete your KYC and add a nominee. If you don’t want to open a demat account some mutual funds invest in listed units. They can take monthly payments but will have a slight extra layer of cost.
Remember to consider the volatility of the metal. The price can move quite a lot so don’t invest too much in this area. Ensure that you are not investing money that you need soon.
Tax Considerations
Profits will be taxed depending on how long you have held for. Rules have changed recently in the Union Budgets. Check the most up to date rules using official guidelines or a chartered accountant. Physical gifts and investments may be treated differently. If you are giving large amounts of value seek professional advice.
A Gift That Grows
Traditions can be combined with caution. Continue to give them the shiny coin, carved idol and beautiful utensils. Love should have a physical aspect. However start to create a disciplined habit of investing. Over the years the family will have lovely memories of celebrating generously and a well managed portfolio.