Unlocking the Potential of NPS Vatsalya for Your Child's Future" – Aakarsh Dalmia, CFPCM

“NPS Vatsalya is designed specifically to meet long-term financial goals for children. It’s all about creating a financial cushion early on that grows exponentially over time,” said Aakarsh Dalmia. The scheme allows parents or guardians to invest on behalf of their child, starting from birth, with the funds locked in until the child reaches the age of 60.

Key Features of NPS Vatsalya

Aakarsh outlined several key features that make NPS Vatsalya stand out from other financial products:

1. Long-Term Horizon: Investments can start at birth, except with options of 4 withdrawals till age 18 years, the funds are locked until the age of 60.
2. Flexible Contributions: It requires a minimum annual contribution of Rs 1000 per annum with no maximum limit.
3. Compounding Growth: Over the long term, compounding helps turn modest contributions into a significant corpus.
4. Diversified Investments: The scheme allocates investments across equities, government securities, and corporate bonds, ensuring a balanced risk profile.
5. Partial Withdrawals: While primarily a long-term savings tool, partial withdrawals are allowed for education or medical emergencies, adding flexibility.

Eligibility for NPS Vatsalya

Parents or legal guardians can open an NPS Vatsalya account for a child right from birth. The account is managed by the guardian until the child turns 18, after which the child gains control. “Any Indian citizen, including Non-Resident Indians (NRIs), can invest in this scheme,” Aakarsh Dalmia added.

Past Returns: Steady and Reliable

When asked about past returns, Aakarsh pointed out that NPS, on average, has delivered annual returns ranging from 9% to 12% over the last decade on its different portfolios with equity being one of the assets in it. Equity investments within the NPS portfolio have shown strong performance of about 14% pa over the last 10 years, while government and corporate bonds provide stability.

From ₹11 Lakhs to ₹100 Crores: The Magic of Compounding

Perhaps the most eye-catching aspect of NPS Vatsalya is the potential for incredible wealth accumulation. Aakarsh Dalmia illustrated this through an example of a one-time investment of Rs. 11 lakhs at the time of a child’s birth, compounded at an assumed annual return of 12%. Over a period of 60 years, this investment can grow to Rs. 100 crores approx.

Here is how the numbers break down:

• Initial Investment: Rs. 11,00,000
• Assumed Rate of Return: 12% per annum
• Investment Period: 60 years
• Final Amount: Rs. 98,73,56,627 (Rs. 99 crores approx.)

So, in this case, Rs. 11 lakhs grow into Rs. 98,73,56,627 thanks to the power of compounding working over six decades.

One can also adopt a short-term monthly investment approach to accumulate Rs 100 Crores and it can be achieved by investing Rs 52,000/- per month for 24 months and thereafter leaving the investment for 58 yrs. Aakarsh added. Similarly, a lot of other investment variations based on client’s cashflow can be worked out to achieve this magical figure.

It’s important to note that 12% is an assumed rate of return based on historical NPS Equity portfolio performance. Actual returns could vary, but this example highlights the immense wealth-building potential of long-term investments, especially when started early.

“Compounding is what really makes this scheme so powerful, leading to exponential growth,” Aakarsh emphasized.

Final Thoughts

As more parents become aware of the importance of early financial planning, NPS Vatsalya will quickly emerge as a preferred option for long-term investments. With its ability to turn modest contributions into large sums over time, the scheme offers peace of mind to parents and financial security for children.

“If you start early and stay disciplined, you can achieve unimaginable financial growth,” Aakarsh concluded.

NPS Vatsalya stands as a testament to the power of compound interest and long-term planning, making it an excellent choice for those who want to give their children a secured financial future, even when, they would not be around.

Aakarsh Dalmia can be contacted at 9051355120 or at aakarsh@dalmiafinserv.com

Dying Rich vs. Living Rich: Why Many Indians Die Rich but Don’t Live Rich

Imagine you’re playing a video game, collecting coins to unlock treasures. But what if, after gathering all the rewards, the game ends before you get to enjoy any of them? This is how many Indians live—working hard, saving money, and building wealth but never fully experiencing life’s joys. By the time they feel financially secure, it’s often too late to truly live the life they imagined. Many Indians die rich but don’t live rich.

Let’s explore how you can balance financial wealth with enjoying life’s different stages through the concept of "time buckets." This concept helps break down your goals and desires at different stages of life, helping you get clear on what you actually want to achieve or enjoy as you go through life.

What Does It Mean to Live Rich?

Living rich isn’t about owning luxury cars or enormous houses. It’s about living comfortably, having peace of mind, and spending on things that bring joy—like family vacations, pursuing hobbies, or treating yourself to something special occasionally.

For example, someone who saves all their money but never spends on experiences might be financially rich but miss out on the richness of life.

Why Indians Save So Much

Many Indians grow up believing that saving is the key to a secure future. Our parents and grandparents faced financial hardships, and saving was their way of protecting themselves against uncertainties. While saving is important, enjoying today is equally vital in our fast-changing world. Think about how quickly a reel on Instagram becomes old in 30 minutes or how a tweet is forgotten after 10 minutes. This shows how important it is to balance saving and enjoying life.

Introducing the Concept of Time Buckets

The idea of "time buckets" helps us understand that life comes in stages, and each stage brings different levels of energy, desires, needs, and enjoyment. These stages can be thought of as:

1. Youth (25-40 years): High energy, curiosity, and a strong desire for adventure and experiences.
2. Middle Age (40-60 years): Responsibilities grow, but there’s still a strong urge to enjoy life with family and explore passions.
3. Retirement (60 years and beyond): Less energy, but more time and money to relax, enjoy leisure activities, and pursue hobbies.

Each stage offers different opportunities to enjoy life. But certain activities require time, money, and energy. If you save all your money for retirement but wait too long to enjoy experiences, you may no longer have the energy to fully appreciate them.

Balancing Saving and Spending

The key is to balance saving for the future with spending to enjoy life in the present. Consider these two points:

1. Save for the future: Build wealth and security through savings and investments to cover future expenses like retirement, healthcare, and emergencies.
2. Spend for the present: Spend on things that bring joy and fulfillment now, like vacations, family outings, or learning new skills.

The challenge is to balance both—saving enough to ensure your future is secure while also enjoying life’s richness at every stage.

Asset Building vs. Living Today

Many Indians focus heavily on building long-term assets but forget to set aside money for immediate enjoyment. Investing in assets is important, but it shouldn’t come at the cost of living your life today.

Owning multiple long-term assets may make you feel rich on paper, but it’s not the same as having the freedom to enjoy activities and experiences while you have both money and energy. Some of your wealth should be easily accessible—money you can use now to enjoy life without waiting until it’s too late.

Time Buckets and Financial Planning

Financial planning should reflect the time bucket concept, where you allocate money for different life stages based on your current needs and desires. Here’s a simple plan:

• Youth (25-40 years): Focus on building your career and savings but also spend on experiences that match your high energy—like traveling, exploring hobbies, or learning new skills. In this stage, people usually have time and energy but less money.
• Middle Age (40-60 years): Save for retirement and emergencies, but don’t forget to spend on family vacations, your children’s education, or pursuing passions. This stage offers a balance between responsibility and enjoyment. In this stage, people generally have money and energy but less time.
• Retirement (60 years and beyond): By this time, your savings and investments should allow you to relax and enjoy leisure activities. However, waiting until retirement to enjoy life could mean missing out on experiences that require more energy. In this stage, people often have money and time but less energy.

If you postpone enjoying life’s pleasures until retirement, you may find that you no longer have the energy or health to fully appreciate them. Imagine dreaming of traveling the world but waiting until your 60s to do it. By then, you might not have the stamina for long trips.

Instead of waiting, balance your savings with experiences at every stage. Don’t let fear of the future rob you of the joy you can have today.

How to Enjoy Wealth Responsibly

Here’s how you can balance living rich today and tomorrow:

1. Time bucket approach: Allocate a portion of your income to each stage of life, considering how much energy and desire you have at each stage.
2. Set meaningful goals: Identify your short-term and long-term goals. Whether it’s taking a trip, buying a home, or retiring early, having clear goals will help you manage your money better.
3. Review your finances regularly: Life changes, and so should your financial plan. Regularly review your savings, spending, and investments to ensure they match your current life stage.

Conclusion: Live Rich at Every Stage

Dying rich but not living rich is like saving a garden’s best flowers without ever enjoying them. You can secure your future while also living a full life today by balancing your spending and saving according to your life’s time buckets.

Remember, life isn’t just about reaching your financial goals—it’s about enjoying every moment along the way. So, plan for tomorrow but live richly today!