Are you afraid that your child will be left behind because you as a parent can’t afford top-level education? In today’s world, education is key. As a parent, are you prepared to give your children your best? Are you apprehensive about your financial contribution towards his or her education? Great opportunities lead to great success. Success follows good education; but is your child equipped and fortunate enough to be part of prestigious institutions, or amongst the best to benefit from top-class education? You would not want your child to settle for less, would you? As the saying goes, every problem has a solution and your solution to providing your child a bright future is simple – it is the right understanding of what has to be done today.
Considering the wide choice of educational institutions and their related costs, both for conventional studies and higher education, either in the country or overseas, it is vital that as parents, you are aware of the right investment strategies. Remember, you are responsible for your child’s future. Are you making the correct investment moves? If your answer is “yes”, then you need us. We will guide you towards better solutions with different strategies that will help you take the right decisions. If you think you’re late to the game and have yet to start investing, we will provide you with the solutions. Remember, the RIGHT INVESTMENTS lead to a child’s BRIGHT FUTURE. It is never too late to receive guidance.
Most Families believe that their biggest is to do their best for their children, every memory delight but during the emotional journey one forget about his child’s future career-related expenditures. It is not because it is not important, but because one thinks there is plenty of time for this sort of planning. But when time flies out it become a challenge.
Please ask the child to draw his/her dream career and when it is done ask yourself whether you are ready to fulfill your children’s dream. Now, answer the below questions:
- What could be the higher studies cost in current scenario?
- How maximum it would go in the future?
- Are you well prepared to bear this educational cost?
- After you, what would be the backup plan to fulfill your child’s dream?
Answer to these above concerns can be from the following solutions:
- Availing of a loan facility as per the requirements.
- Wait for the right opportunity and time to come and then start investing. Till then wait to cross the bridge when you get there!
- Have a great insurance policy with maximum benefits.
- Start investing in real estate.
- Business income or salary are sufficient enough to cover all these educational expenses.
If the answer is from one or more of these above options, THEN YOU ARE MAKING A BIGGEST MISTAKE!! You are putting your child’s future education and career at stake.
What do Anand Mahindra, Sundar Pichai, Indra Nooyi, Satya Nadella, Naveen Tewari have in common? They all have been schooled with quality education from some of the best institutes in the world. That serves as a contributing factor to their development and helped to reach the top of their career. Having said that, with a strong educational background, one can acquire money and be paid off with good monetary income and rewards just like them.
Knowledge always has more value than money and money is the driving force to gain that knowledge.
Frequent Challenges Faced by Parents
- Rising cost of child’s needs
- Two unknown villains – Inflation & Taxes
- Change Dilemma of child’s dreams
- Your child is growing, but investments are not
- Fulfilling other important financial goals
- Changes in Government policies
- Choice of Correct Children’s Investment plan
Your child growing but investment is not: – Many parents feel happy as their son or daughter grows up both physically and mentally; but as parents do you have made some investments and planned for their career? At a point, you might start realizing that the growth of your child is exponential and it is also directly linked with large expenses. On the other hand, investments are not sufficient to bear those expenses or maybe not grown enough the way you expected at the initial stages or as was told. It is quite natural that this ambiguity between planning and execution would start adversely impacting your mental peace, And this could be the breaking point when you will start finding out the reason for such failed plan and hastily look around for alternative available options to bridge these unwanted gaps and may adopt the wrong practices for quicker benefits such as gambling. Why do you think that why this has happened, ignoring inflation in calculation is the real cause?
Common Investment Mistakes Parents Do
- Wrong Timing
- Not setting the Right objectives
- Wrong choice of Investments
- Underestimation of the cost of education
- Depending on Educational Loans
- Wrong Financial behaviour
- Making Excuses and “Know-it-All” Attitude
An intelligent person will always learn from their own mistakes but a wiser person will learn from other’s mistakes. In this investment world, you cannot afford to learn from your own mistakes. So, you are left with no choice but to learn from other’s mistakes. We help you to understand your mistakes, thus making you wiser and more careful while doing your investments. This is true because time is money, and money is essential for achieving your goals. If you lose the time, then you will lose the money, which can lead to compromising your child’s goal.
Mantra: – Time gone = Forever Loss of Compounding Effect = Forever Loss of Wealth Creation Opportunity
As parents, you may have made mistakes while investing in your children. These mistakes have a cascading effect. For example, if you made an investment mistake by investing in a wrong financial instrument when your child was two years old, and realized this mistake when he or she was ten years old, it may be impossible to recover the money that has been lost. You cannot go back to the past and correct that investment mistake.
Many smart people do not have a good job for managing their wealth. Growing money requires a different skill set. They often invest their money on an ad hoc basis, depending on which fashionable or popular scheme their circle of friends discusses during dinner parties. People do not bother to create a customized portfolio. The sad reality is that they are not realizing the huge price which they are paying off against this benign neglect, in the form of loss of opportunity costs.
Wrong timing: – We sometimes procrastinate by taking important decisions too late in life or are short-term thinkers, wherein we do not look at the long-term benefit of any step that we take. The effect of such mistakes is not immediately evident but surely causes us a lot of issues over a period of time. The most dangerous statement I hear from parents is “We’ll plan next year”. If your baby is born this year, why should you plan his or her investments for next year onwards? You can’t dig a well when you are thirsty. You should not think of investing when a child requires money in the next one or two years. Today is the best day to start, start investing today to have a bright future tomorrow.
If your child is three years old and the higher education expenses are 15 years away from today, only after which you require money, why should you invest for a period of two to three years only? Many investment related decisions go wrong here.
Not setting the Right objectives: – We have seen people getting very excited at the beginning when they start with their investments. The initial excitement wanes off soon. If someone has invested in a fixed deposit, they start thinking that it is not yielding any lucrative returns, post taxes. Besides, if they have invested in shares and equity mutual funds and if there is a fall in markets, they get disappointed as their investments turn negative. They feel they made a mistake by investing in such assets. One day, they see an advertisement in a newspaper offering a deal on real estate just by paying a 5% down payment and the rest by loan and then repayment in easy installments. The advertisement also promises the potential of doubling its value in a few years. There could be another advertisement about the latest jewellery design by a jeweller offering only 5% wastage instead of 15% wastage.
On one side you are disappointed with the returns of the existing investment made and on the other side, the exciting deals on real estate or jewellery offer pushes you to go for that deal. You will start looking at the options, which can be liquidated immediately to arrange that down payment. As humans, we are irrational, tempted either by greed or by fear. Greed takes over and the child’s investment portfolio is targeted. You will start thinking that the child is too young, and we can play around with that money at the moment and can replenish it as soon as the real estate values double after three years. But remember, taking out money from our child’s portfolio is like taking out paste from the toothpaste tube. Easy to remove, but almost impossible to put it back.
Focusing on returns than on time: – If a person is given a choice to choose between 12% and 18% returns, which one they will choose? The obvious choice would be 18% but a person forgets about safety and liquidity so always SLR rule should be followed i.e., Safety, Liquidity and then Returns priority. In the compound interest formula we should focus on time rather than on rate. Focus on time, which is in our control not rate.
Wrong Choice of investments
Ignoring Equity/Equity Mutual Funds: – “Mutual Funds investments are subject to market risk”. It is because it is transparent, and the regulator protects interests of investors. Are there is no risk in Gold, property, no price discovery mechanism in Gold or real estate?
Ignoring Offshore investments
Volatility
Uncertainty
Complexity
Ambiguity
Investments skewed towards non-financial assets
Chasing insurance cum investments plan
Underestimating the Cost of Education
Wrong Financial Behaviours: – Many parents become very emotional while shopping for their child, if the shopkeeper says that this toy is soft and it would make your child feel more comfortable, they end up buying that toy. Why? Because the shopkeeper has touched the parents’ feelings or hearts and the buying decision was made based on emotions. Let me tell you a secret: Marketing plans are designed around the tenets of biology. It is because of the brain. When I give you all the facts and figures about an investment plan for your child you say “I know what all the facts and details say, but it just doesn’t feel right” whereas an advertisement works with a different strategy. The advertiser’s goal is not to sell to people based on their need the goal is to sell to people who already believe in the investment product. By doing so, investments get sold completely on emotions and not on any rationale. Many times people go to a nicely designed stalls or banks where people went to know the security the child’s future. The exhibitor welcomed them and asked them to sit and hear out what he had to say. They were offered snacks, tea, and coffee to ensure that the couple sits for a longer duration, only to convince them further about the product. They were told that buying this investment product will secure their child’s future and without any second thought decision is done.
Some common thinking errors: – There are two types of returns, Investment returns and investor returns.
Herd Mentality: – Following the same what others are doing is called herd mentality. For example, if everyone is buying property or insurance policies then everyone does the same without thinking about their priorities, and situations that might be different from others.
Wealth destroyers – Fear and Greed
Making Excuses and “know-it-all” Attitude: – We all love to spend money but not when it comes to investing in money. Yet, both spending and investing involve money usage out of your pocket. The only difference between the two is that spending brings pleasure and joy whereas investing requires sacrificing today’s pleasure and thus we have seen the following excuses very commonly that may lead to procrastination in planning.
- We went for our last vacation on EMI, hence once it is completely paid off, we may think about planning after that.
- We need to paint our house, so we can start next year.
- The next iPhone is launching soon so I want to be the first who buys it.
- Will start from next financial year.
- Let me consult with my CA first.
- I have to upgrade my car, so once it is done I will think about planning.
- Let me get a promotion first before starting to invest.
- Time is not right as it is inauspicious, let me think after a few weeks when it is auspicious.
- My business needs funds.
- I don’t have time to invest.
- I will sell some of my property and can manage.
- I can manage my child fee today and nothing will leave afterward.
Apart from that some genuine financial priorities include taking care of your parent’s medical needs, requiring funds for your education to upgrade your skills, going on a maternity break that may impact family income, or flagging business and you may have difficulty taking care of basic needs.
Not seeking financial advice: – To whom do people consult when they require legal advice, medical advice, taxation advice, building design etc.? Don’t they always choose professionals? But when it comes to goal planning and investment decisions, why do people ask and advocate, CA, office accountants, friends, family, colleagues at the office, neighbours and so on?
These advisers can be your well-wishers, but they may not be experts to guide you on the matters of finance. Every professional may have mastery only in a particular area and not everything. Investment management is a serious affair thus it is advisable to always better to seek professional advice in this monetary matter as well.
Let’s do a reality check: – This is the point where you need to realize your mistakes and do a reality check as soon as possible. If you keep on doing such mistakes again and again then either of the two situations could happen to you.
- Your child can’t pursue his dream career due to your bad financial planning. He/she may settle for an ordinary educational course that he/she has no interest or aptitude in.
- Your child may end up taking an educational loan along with you jointly and may be able to fulfill his/her dream career but with a piece of financial baggage carrying throughout their career.
If you do not want to face such challenges which other parents usually face and do not want to commit any mistakes while planning for your child’s future education. Then take professional advice immediately.