Strategies of Financially Independent NRIs

Strategies of Financially Independent NRIs

Posted on 01 Jun 2023

Non-resident Indians, or NRIs, account for a large part of India’s community abroad, fostering growth, in an economic sense, both in India and outside. NRIs are financially independent, for the most part, and are always looking for new ways to invest in their home country. Whether their strategies include making a child education plan, or investing for their own retirement, NRIs can teach the world a lot about being financially sound, especially with regard to maintaining a healthy financial safety mesh for the future.

Who is an NRI?

Simply put, an NRI is an Indian citizen who lives abroad, out of India. The rule for NRI classification is that an NRI must have stayed for 183 days or less, in a financial year, in the home country, India. According to law, NRIs are citizens of India, but they pay taxes in both countries, that of their origin and residence. Nonetheless, for NRIs, there are various tax deductions available on investments made in the home country.

NRIs are important to India as they are contributors to the economic development of the country. For example, according to World Bank reports, NRIs from the UK alone have remitted large sums of money in their home country, amounting to a whopping $80 billion! You can only draw a logical conclusion from this, that the 30 million or so NRIs have their investment and financial plans in order, be it for a child’s education plan and marriage, or their own retirement corpus. Whether you are an NRI or not, there are some lessons to learn from the trends in NRI investment and the strategies used to become financially independent.

1. Responsible Behavior

The first thing to note about any NRI investor is not just about a tactic that is employed, but about inherent NRI behavior patterns that result in well-thought out financial plans. NRIs have lived, we can assume, for the most part of their lives, abroad. Since they have more exposure to the world at large, and maybe a good understanding of planning for the future, they tend to automatically invest in it.

As NRIs have the opportunity to invest in their residential country as well as in India, they automatically seek new ways to make money and build on their capital. Most NRIs may have a child’s continuing education on their minds, as they may want their children, like themselves, to be financially independent. They know that the only way to beat inflation and have a hedge against the high cost of living in their residential country is to plan investments in advance and secure their financial future.

2. Becoming Financially Independent to Meet High Living Costs - Opening Accounts in India

The costs of living are high abroad. This is already a known fact. NRIs who live in countries other than their home countries know this as they live day in and day out trying to bear high daily expenses. In terms of health, primarily in countries like the USA, costs are very high, and everything from an eye check to dental surgery costs the earth, the moon and the stars. Health insurance is expensive in the USA, and even if your employer mandates it, typically, most insurance plans abroad have co-pay schemes, where policyholders have to contribute a certain amount to health expenses. Given all this, NRIs tend to get their finances in order by investing in products back home. The first thing that they may do is to open a fixed income account, like a fixed deposit. They could also invest in plans for NRI child insurance.

3. Opting for Specific Accounts to Meet Unique Financial Goals

In choosing any investment scheme, an NRI will evaluate its goal, and then proceed to invest. For an NRI to be financially independent and plan for future financial goals to be met, they will set up fixed income accounts in India, which earn a particular rate of interest, ensuring guaranteed returns. NRE, NRO and other accounts can be opened for NRIs, with a view to managing any income earned in INR. In turn, the interest earned from these accounts can be reinvested in other investment products like insurance cum investment schemes.

4. Buying Health Insurance

Many NRIs have dependents living in India. Although health insurance may not offer coverage for an NRI in their home country, it does offer coverage to any dependents in the policy who may be living in India. Besides this, if the policyholder, the NRI, is prone to visit India quite often, they can avail the advantages of the policy should any health risk befall them while in India. Finally, if an NRI buys health insurance in India, they save on tax substantially, and this is a boon to save capital for an NRI.

5. The Purchase of Life Insurance

For an NRI, any insurance is expensive in their home country, especially if it's a paid for private insurance cover. Nonetheless, NRIs need insurance for health coverage in the country where they reside. When it comes to life insurance, an NRIs buys a life insurance policy which is a pure term plan, to ensure that any beneficiaries get a benefit upon the policyholder’s untimely demise. This ensures that expenses involving a child's education plan, the marriage of a child, or any other costs, are taken care of when the policyholder is not around to bear costs.

Besides term plans, life insurance plans come in variants that offer guaranteed and regular income for a policyholder’s family while the policyholder is alive. Plans like a ULIP offer such advantages. Such strategic moves make NRIs and their families financially independent in the long-term view.

6. Investing in Pension Plans

The cost of continuing the education for children is always on an NRI’s mind and to be financially prepared for this huge burden, NRIs invest in pension plans for retirement. This means that they can spend on their children’s education while they earn a living, without worrying about their own golden years. Building a corpus for retirement is a must for an NRI. They may do this by availing of guaranteed pension plans in India, enhancing their retirement corpus. Plans that serve as investment vehicles ensure good returns and secure retirement.

7. Taking Advantage of Currency Conversion in Investment

NRIs have an edge when it comes to investing in India. Since the INR is more or less lower in value to the USD and many other foreign currencies, NRIs have chunks of cash to invest in India. They reap rich rewards as they invest in everything from equity to real estate. This is why NRIs become financially independent quickly, even though the cost of living is high in their country of residence.

The Quick Road to Financial Independence

Financial independence is a given for NRIs who choose a wide variety of investments from life insurance to retirement plans in India. They stand to benefit from tax deductions while they wisely invest in instruments that will reap benefits to achieve future financial milestones.


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