You love your kids and spend a lot of money on them. You try to give your child whatever he asks. You just cannot refuse your child his wants. Your child looks at you and learns from what you do. You enter a shop and buy yourself a coat. Your young child sees this and asks you, to buy him a toy. You tell him…No….I don’t have the money. Your child throws tantrums and makes a lot of fuss. Your child sees you indulging in your wants; he believes you can indulge in his wants too.
Yes….Your child learns from you.
You invest only in fixed deposits. You teach your children, that investing in equity is risky and is best avoided. Your children get the idea, that equity must not be touched and an investment in fixed deposits, is the way to go. Your children become risk averse investors.
An investment in equity (stocks and equity mutual funds), is good, if you invest for the long term. You also need to know what you are doing and for this you need to do your research. An investment in equity is most likely to beat inflation in the long run. Sometimes you need to think returns and not just risks.
An ad on TV by a reputed NBFC, shows a middle aged lady, trying her hand at swimming. She sees a young boy easily swimming in the pool. She sees a young girl diving. The middle aged lady struggles silently in the corner of the pool, holding the edge of the pool and wishing she had learnt to swim, at a younger age.
Some skills just have to be learnt at a younger age and investing in equity is best learnt, at a young age. So teach your children to invest in equity, when they are in college and they will reap rich dividends, later in life.
You need money. Just take a loan. After all, you can easily repay the loan. Your children get the idea. Need money just take a loan. Loans are taken to buy essential items and for an emergency only. You must not take loans, for any whims and fancies. Loans are for the things you really need.
So keep loans as a last resort.
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You want a shoe. You enter a shop and buy it. You see a lovely dress. You enter a shop and buy it. Whatever you want, you enter a shop and buy. You are an impulsive buyer. Your children look at you and say, buy for us too. They too become impulsive buyers.
If you are an impulsive buyer, your savings are most likely to be a mess. You will have no money to invest. Worse, your children will follow you, into the debt trap.
Remember: If you buy things you don’t need, you will soon have to sell things you need.
So teach your child to save and invest, when he is young and he will grow to be a rich man.
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