There’s no denying that parents wish their children well and keep advising them about something or the other. However, in their eagerness, they often end up giving the wrong financial advice to their millennial children.
Their advice is considered outdated due to two primary reasons;
There is a huge difference in the work, personal and financial life of millennial compared to theirs.
Financial products and options available today are far more than during their time.Here are the three most common advice that parents should stop giving their children.
1. Buy a pension policy at the earliest
For most Indians investment journey begins with policy and the most popular policy is the LIC Pension Policy. A typical pension policy will help you get Rs.8000 per month after 25 years.
Well, isn’t this amount really less for a person after 25 years? Also, the individual may receive measly returns of around 4- 5.5%. Parents may advise their children to buy a pension policy soon after retirement. However, asking the children to tuck away their early earning savings in low earning products is not a great idea.
Today, an individual needs a different insurance policy. A term policy having dependants is also a great idea. An individual may also look at an insurance that will help him sail through a job crisis, a major medical illness, etc. It is important that individuals understand their requirements and financial objectives before investing in any of the instruments.
2. Maintain a good relationship with the Relationship manager of the bank
Most parents advise their children to have a healthy relationship with the relationship manager of a bank. According to the parents, the relationship manager suggests the best products to invest and he must be considered seriously.
Although a relationship manager’s advice does matter, millennials hardly have the time to chase him all the time.
In the past, the relationship manager would help the parents with cheque book requests, getting change in denominations of 10s, 20s, and 50s. Today, the scenario is different and people don’t need to request for checkbooks and denominations change. You must do thorough research about investment plans, their lock-in period, their exit cost, risks involved and other aspects instead of blindly following the relationship manager’s advice.
In most cases, an individual is able to invest Rs.1.5 –Rs.2.5 lakhs (per annum) of his income in investment products. It is, therefore, important that individuals explore their journey and understand what suits them the best. Individuals can seek the help of a professional financial advisor or do-it-yourself by exploring the web for details.
Remember, understanding an investment product thoroughly before making any decision is much better than investing for the sake of a “manager’s” relationship.
3. Purchase a house
How many times have your parents said, "Oh, why don't you invest in real estate (house). Its prices will only go up with time?” Well, they may be right but you must consider a few facts before buying a house.
Will the millennial settle in the same city with their parents?
Won’t the parents leave the house to their children?
If the young adults start paying EMI of the house, they may or may not have much to invest to accumulate over the years
EMI is not the same as rent.
What if the millennials don't stick to their job and follow their passion after a few years?
Unlike the previous generation, the new generation may not work until their retirement
As grown up, your children must take the responsibility of understanding what their requirements are and explore ways of achieving them.
Other than the points mentioned above, parents can advise their children to take care of their expenses and matters related to their career or marriage. It is important for parents to understand that their advice does matter but not in financial matters.