What is the best investment to serve as income for Parents/In-laws?

POSTED BY Vijay G ON March 11, 2013 9:39 pm COMMENTS (4)

Hi,

I was thinking of saving some funds in a Fixed Deposit (gifted to parents), such that the interest can be used by them for their monthly expense. As this fund would be in their name, the tax would also be nil.

But recently I was told that the interest earned on an FD (approx 9-10%) is nearly equal to the inflation rate and thus, after a year or two the FD interest will not serve the purpose. Logically I agree with this explanation.

What is your suggestion? Is it FD which is safe and secure principal or something else?

I need to do this for my in-laws as well, hence am very concerned before jumping in.

Thanks in advance,
Vijay

4 replies on this article “What is the best investment to serve as income for Parents/In-laws?”

  1. Vijay G says:
    March 13, 2013 at 10:48 am

    Thanks Ashal, agreed! That makes sense as it will also help me balance out the inflation and indirectly build the investment for the future.

    Reply
  2. Ashal Jauhari says:
    March 13, 2013 at 10:12 am

    Dear Vijay, in addition to what dear FFC, has already told you, there should be some continuous push over in the basic capital from you to cover the loss of purchasing power due to inflation. For example, if you are providing 10L Rs. as seed capital as of now for your parents, it’s ok but next year, at least give 1L more to make base capital 11L & do it continuously for next few years.

    Thanks

    Ashal

    Reply
  3. Vijay G says:
    March 13, 2013 at 9:58 am

    Thanks for the guidance Sir! Appreciate your help.

    Reply
  4. Free Financial Calculators says:
    March 11, 2013 at 10:01 pm

    It depends on their need. Do they need a constant source of monthly/yearly income and if you will handle any inflation related expenses?
    How much corpus do you have? How long do you want this income, their lifetime?

    Assuming you have some constant lumpsum to invest and are not going to invest anymore then principal protection is more important and FDs will do the job. if their expenses increase later you compensate for it.

    Another way is you invest a lumpsum in FDs now and you supplement this with another lumpsum say in another 3-5 years so that they can combat inflationary expenses.

    Yes FD returns match inflation. This argument is used to dissuade people who want capital appreciation. Not for those looking for regular income.

    Reply

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