Why parents play spoilsport in Children financial planning?

September 15, 2015   ·   0 Comments

Why parents play spoilsport in Children financial planning?

One of my old and best friend who have known me since I am born (We share the same birthday and year as well) who started his financial planning recently called me up and asked me if he could stop his investment in mutual funds. I assured him that we can do that whenever he feel like and interrogated on why the sudden urge to stop. He told me that his parents especially his Father is not comfortable him investing in Mutual funds. After a conversation, he asked me to have a conversation with his Dad and make him understand the importance of financial planning.

This is one of the key challenge which I have seen recently with the young investors is their disability to pursue their parents and partners understand the importance of proper financial planning. This is certainly an intriguing challenge to solve. To be honest, I faced the same challenge 8 years back when I was 20 years old and my father had the same concerns. I was in last year of my college and I was not even earning. I had to talk about the whole world of finance to him which is always believed to be the best known to the head of the family. After couple of hours, not only I was able to start my own financial planning before even I started earning but incorporate few of the rules of the financial planning to the money of whole family to which my Dad and elder sister were contributing.

Most of our parents would have coaxed us to open our first Public Provident Fund (PPF) account or making our first investment in LIC from their old trusted friend or doing a fixed deposit as and whenever some money is saved in your account.

I would love to hear that how many of you have come in this category in comments section.


They generally don’t hook to the idea of goal based financial planning, mutual funds or term insurances. To be honest, I have across numerous parents for whom investments can only be done through Debt instruments i.e. all fixed interest generating investments. Stocks is a big no as most of them would have been caught in some fag end of bull wave and lost money in stocks.

But the question is – How could the best person in your home loose money?

Answer is pretty simple and straight forward. How many of you know that your parents have lost money in stocks in 1994, 2000 or 2007 stock market crash. Have you ever cross checked that why they lost money? When did they start investing in stocks? Which portfolio of stocks did they hold? I would love to hear comments regarding this as well.

The answer to it is written by Marc Faber famous Quote on Greed and Fear. Eventually, you would find it that 80% revolved around making money initially and when they started getting confidence, they were caught in bull wave and stock market fell sharply for which they were not prepared. Most of our parents would have burnt fingers in stock market crash.

The Question is: Was it a methodical approach of Investing? The answer is No. That is the basic reason due to which they lost money in stocks.

Now, let us talk about few things which needs to be discussed with Parents and Partners to gain their trust:

The best way to start is to discuss your finances and planning with parents and partners and take their opinion. This will make them feel involved and in the process they will find it easy to open up to you. In turn, it will become easy for you to learn about their finances, problems and offer your assistance.

The first step – Making them comfortable

It helps to help your parents or elderly dependent organize their finances. This will not only give them peace of mind, involvement and knowledge of parents’ money will also help you. And give you time to focus on your own post-retirement planning, as that is also very important.

However, your parents may not be comfortable discussing money matters with you. And it may not always be easy for you to make them talk about the same. You may be required to walk the extra mile to ensure they discuss the same. The motive, here, is to understand their situation to help them take better decisions.


Second Step – Conducting a financial check 

It is very crucial to conduct a quick financial health check / review for parents. A review will help knowing what instruments have parents invested in and how much has the investment summed up to. Consolidate their investments in fixed deposits, gold, PPF and shares. What are their liabilities (if any), banking relations and expenditure patterns, tax status and various other matters that have a bearing on their financial health. Particular attention should be paid to make sure that their asset allocation strategies are appropriate and there are adequate resources to help them support their lifestyle.


Third – Health Insurance:

Medical costs is a priority area for parents. Check if they have any health cover, in case they do, what all does it offer. If not, you could see if it is possible to take a plan for them or include them in a family floater plan.


Fourth – Banking and related issues:

Consolidation should be key when it comes to parents’ financial affairs. They should be helped to do away with unnecessary bank accounts. You would be amazed to see how many ban accounts are opened by parents in name of family members across different banks However, over time they do not use all accounts. It would be helpful to review all the accounts and activity, accordingly closing down idle accounts and shifting the balance to some active account. Also, cross check that nominee is declared in all bank accounts, investments, demat accounts, deposits, and so on helps.


Fifth – Stress on will making:

Having a valid will is of utmost importance. This is sensitive issue and needs to be handled gently. This should be accorded equal priority as other financial matters especially when you are not the only sibling of your parent. If required, hire trusted legal experts to help your parents make a will, especially as many elderly these days insist on keeping a will confidential.


Sixth – Taxation:

This continues to haunt taxpayers across different ages. At their age, parents may not be in a position to be updated with the latest tax laws and therefore, help them optimize their tax outgo. Many a time, parents find it tough to obtain professional help for these purposes, as their accountants might have also retired by then. In such cases, children could help them with the right professionals.


In case you like the article please do let me know in terms of comments, like.

Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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