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Business News » Personal Finance News

Money matters: Did you consult the most important people in your life? You lose, if you did not

Since financial planning is an exercise for the family, the family is entitled to know. For all you know, they may come up with useful suggestions. But above all, it instils a sense of financial responsibility and pride in the children. Without getting into the nuances, children can be taught lessons like frugality early in life.

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Money matters: Did you consult the most important people in your life? You lose, if you did not
It is always advisable to involve your family members in the process of financial planning. Image source: Reuters
Written By: ZeeBiz WebTeam
Updated: Thu, Oct 11, 2018
02:30 pm
Mumbai, ZeeBiz WebDesk
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At a recent conference on financial planning, a financial advisor asked the guests who planned their finances if they had taken their families into confidence? It turned out that hardly anybody involved their families in financial planning.

Since financial planning is an exercise for the family, the family is entitled to know. For all you know, they may come up with useful suggestions. But above all, it instils a sense of financial responsibility and pride in the children. Without getting into the nuances, children can be taught lessons like frugality early in life.

Immediate family must be involved
It is always advisable to involve your family members in the process of financial planning. Of course, this is a confidential document so let it be restricted to the immediate family. Here are some specific reasons for you to involve them in the process.

Your spouse and children must need to understand why you are insisting on frugality. They should see how a small saving today can grow into a big corpus after 20 years. Once they get the perspective, involving them will be a lot easier.

The second reason for involving them is more mundane. Quite often, the family does not know the value of your investments, loans you have and where your documents are kept. This can become a hassle in an emergency. When you involve your family in the financial planning process, these basic things are taken care of.

Your financial planner is less like an advisor and more like a family wealth doctor. To give you the best advice possible, your advisor needs to understand your family too. Your spouse and children must get to know your financial planner and executor of your will, where they can be reached and how to seek their assistance.

Your family is entitled to know what goals you have planned and what financial arrangements you have made for their future. When you involve them in the process they understand how goals are set and how to  work towards the goals. That builds greater ownership in the entire process.

How to get more bangs for the buck?

When your family members get involved, they not only give valuable feedback, but they can also make their own contributions. For example, your father may have funds idling in a Fixed Deposit, which he may want to pool in for equity funds for the family. Your spouse may have a plan on how to squeeze 20% more savings out of your income each month. Your children will look at the entire exercise more practically and may share some best practices their friends are talking about.

It quite often happens that the husband and the wife may have some assets or liabilities they have never spoken to each other about. When you sit down for your financial plan, it builds a degree of trust to talk more openly about the actual situation. You could find a simple solution to the whole issue. At least, you will not be up against any last minute surprises.

Discussing retirement and dependency on children is normally a sensitive and delicate issue.  That is where early involvement comes in handy. From the beginning if children are clear about your post-retirement plans, it will avoid confusion or misunderstanding. Ideally, when you plan your retirement and your post-retirement life, make it a point to involve your children too. You must also involve children and spouse in your will drafting. It is a delicate issue, but the family must always look at it pragmatically, rather than emotionally.

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Finally, this exercise is important to ensure that your children also contribute their might to the process. Let us say, your kids currently spend around Rs 6,000 each month eating out. Instead of telling them that it is a waste of money, explain to them that they can easily reduce their expenses half and save Rs 3,000. If this amount is saved over a period of 20 years, it is enough to part finance their higher education abroad.

By: Vivek Shukla
(The writer is head of product at, Angel Broking)

Source: DNA Money
 

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TAGS:
Financial PlanningMoney matters
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