The moment you start earning money, you start worrying about your personal finances. Though you are mature enough to start stashing away money, you do not have an idea of how to make money from money, and this is when you turn to your parents. Since they are experienced and know better than you about money management, you can blindly trust their set of advices.
Well, there is no doubting the trust factor when it comes to parents, but you need to understand that time has changed with regards to traditional financial products and your financial condition varies from their (what was good for them cannot work in your favour).
Therefore, it is paramount for you to conduct your own research or consult an investment expert before making any investing decision. Here are some of the reasons when you should avoid following your parents’ advice.
They do not have complete knowledge about investment tools
Investment has come a long way, but it is keeping evolving by piecemeal. Your parents may not have enough knowledge about the latest investment trends and investment methods to grow wealth. For instance, now you can opt for investing your money in equity, bonds, mutual funds and real estate to create a diversified investment portfolio.
Further, your parents may force their school of thought and risk-aversion approach on you. traditionally fixed deposit was considered a better investment choice than buying stocks because the former is not subject to high risk. However, you are likely to get umpteen benefits by investing in stocks.
A good rule of thumb says that you should jot down your investment goals and look over your current financial condition to figure out your risk tolerance capacity. Research expected returns beforehand and then pick an ideal option for you.
They are not updated with new tax rules
Another reason for not catching pieces of advice dished out by your parents is they are not in the loop about updated tax rules. The ultimate goal of investing money is growing wealth and therefore you should pick assets that do not add up your4 income tax.
For instance, fixed deposits are more tax efficient than mutual funds. your parents may not be aware of the intricacies of tax rules. Based on their experience, they will likely dish out a piece of advice that will completely take a toll on your finances.
They may stick to simple and straightforward investing assets just because they feel comfortable with them despite the fact that better and lucrative investment options are available out there.
Setting hopes on property investment
Property appreciates with each passing year and therefore considered the best investment option. Your parents can insist you to invest money in property because its prices keep increasing. When you will sell it after a couple of years, you can earn an inordinate amount of money and then you can reinvest that money.
The cycle will continue like this, but this cannot be an amazing investment way for you. It is just the starting of your career. You may go over the idea of settling in the other town if you get a wonderful job opportunity.
If you invest your money in property, you will have to look after it, and it can be complicated to manage while initial years of your career. Investment in houses can be a good choice when you have an idea where you want to settle down and start earning good amount of money.
Your priorities will differ from theirs
Priorities serve the basis for a money management plan. It is understood that your priorities are different from your parents, so you cannot follow their investing guidelines. For instance, they would have invested money just for building a retirement corpus while you may have been looking toward investment from a completely different angle.
Lifestyle also matters
Though both saving and investing is essential, you cannot emphasize any of them if you are struggling to meet your obligations. You cannot compare your lifestyle with that of your parents. Soaring cost of living and stagnant income is commonly two factors responsible for making it harder for you to make ends meet.
This is why you turn to private lenders in the UK to seek financial assistance. When you have borrowed money, your first priority will have to be repayment of your loan and then allocating your money for any other purposes. Your parents may fail to understand the gravity of debt obligations and may suggest you that work totally against you. This is why it is crucial to research carefully before making a decision.
Parents’ advice can help you but too a little extent. It is advisable that you research, make investment goals, analyse your current financial situation, and risk tolerance capacity before making an investment decision. If you are not able to get it off the ground, you should consult an investment expert.