Papa ko bolo….
I can see the kind of parental pressure that kids are subject to in their lives. Even after a kid turns 20, 25….why even 50 parents think they should run their children’s lives. I know one person who started as a peon and retired as a clerk. He has ZERO understanding of finance. Absolutely zilch.
He has 2 daughters and a son. All his children did Engineering from excellent colleges and mostly on scholarship. The son did his Engineering and went abroad (in the ’80s) but the daughters choose to remain in India. The daughters choose to remain unmarried too. The daughters bought houses for themselves – and the father did move in with one of them, but still has kept his old flat unoccupied.
He continues to ‘manage’ their portfolio. It has fixed deposits, and the usual Lic policies. Every year they put Rs. 70k in ppf, and they have INVESTED in all kinds of LiC products. I have no clue about what kind of returns they have got, but surely they do not have enough money to retire EARLY. As they have not spent any money at all (no vacations, no eating out, no family, great salary in a fantastic MNC) they do have a lot of earned money, BUT portfolio returns are really bad.
Son has escaped the father’s ‘fund management’. However the daughters have suffered….
Kids should tell their parents:
1. Please stay off: Tough to say, almost impossible. However if you do not have enough money in equities or other volatile assets you cannot beat inflation.
2. Managing an income fund, managing a trading equity portfolio, managing an investment equity portfolio, managing a day trading…, real estate – again for gain or rent, commodity portfolio, taxation, …..and over all financial planning is a skill which CANNOT be ever found in ONE person.
3. Target oriented portfolio management is very very essential if you need to retire early.
4. Listening to your parents is fantastic, if they bring COMPETENCE along with the love that they have.
5. A good adviser should have empathy, knowledge, congruence of interest and charge a reasonable fee – and it is axbxcxd – and since it is a product EVEN IF ONE of them is zero, the end product will be ZERO.
SAM
Subra,
Me thinks many Indian parents are control freaks! They just do not want to let go and allow their kids to grow up, make mistakes and learn from them! I also find many of them interfering in their kids- especially daughter’s married life and then wonder why marriage is on the rocks!
bharat shah
another story of a father:
a father could not teach much to his kids about personal finance planning , but kept investing his daughter all salaries from starting rs.1500/- p.m. in 1997 to rs.8000/- p.m. and again down to rs.4000/-p.m. in 2001(till she married) in direct equity (with recouping for min. 10% p.a. return . the corpus at the time became RS. 150000/- .it was continued till 2009, touching to @ 700000/- in jan 2008 , reduced considerably, and again raised to rs.424000/- when she finally preferred to use it for buying 3BHK flat ( as part of the cost) with her husband , of course registered in her name! the father was always , particularly at time of hey days of market in 2007-08, to send the money to her if she wanted.
the same father took his only son’s first term life insurance policies (with return of premiums, VIMA SANDESH & VIMA KIRAN, each 3 lacs) from LIC at his 18 yrs. age for father’s own security(!), when the pure term life insurance from private insurer was yet to commence, and afterwards a pure term insurance of 10 lacs from LIC , when it was introduced by LIC before his marriage, and a term insurance of 50 lacs from a private insurer after his marriage and having two kids for security of his family. his savings were kept investing earlier in direct equity , and then shifted to diversified mf along with father’s meager savings throughout from good yrs.2003-07 , and lean yrs. after 2006 jan , only drawn out only in case of necessities. the father always accounted his share of total house expenditure and maintained the accounts accordingly. this is all done with insistence of the son even after now only earning member.and more over he is C.A., (half by degree and half by training!) and father is now 64 yrs. some emergencyf is also kept, and some medical insurance of all members is bought.
and the father is thankful to ‘Wonderland of Investment’ by A.N. Shanbhag in 1983 and then ‘SUBRAMONEY.COM’ and other finance blogs now.
T S Ashok
Yes. Really the blogs are very good eye openers for most of the people. Really my father, forefather.. are not having any awareness due to lack of exposure..Thanks to blogs like jagoinvestor, subramoney,Ninemilliondollers,etc.,
bharat shah
@T S Ashok
there were no alternatives as of today! as per example , though term life insurance was available in developed countries before at least 1983 (i read about it in book of ‘Wonderland of Investment’ by A.N. Shanbhag), but it was first introduced in 2001 or 2002 by HDFC STANDARD. 20 YEARS LATE!what can father do?!
ram
I agree parents of yesteryear did not invest in equities. But let me take my case my father was living in a small town with a income of 4-5K/month. How on earth would he be able to get right advice and guidance in equities?. Were will he check for company quarterly results and how can he maintain a good portfolio.
I know my friends parent who was in equities but only because his brother was in City and they were taking care of his investments.
Kathiresan
Subra Sir,
As usual very good post and I loved it.
I have a question asked by my friend.I tried but could not satisfy his intelligence.
“How are you sure that only equities will beat the inflation and give good returns in long term.Look at Japan and US, both did not give lucrative returns even for 10 years.Are not you speculating by saying this?”
Please give your expert comment and answer,Sir.
bemoneyaware
Saying no to parents means taking responsibility for one’s financial life. How many of us are prepared to do so? I have seen Father of a 37 year old IIT graduate engineer preparing his Income tax returns because his son was busy earning money!