Seven Money Lessons that Dads can Gift their Children
Fathers through their encouraging words, constant sacrifices and actions play an important role in shaping the future of their children. They in their own way teach their children the very basic things and habits in life starting from throwing a ball, riding a bike, reading a book to hard work, integrity and like. Simple teachings and lessons taught by fathers can help solve bigger and greater problems.
Here is a list of the most important money lessons that fathers pass on to their children.
Start saving and investing early
Starting from saving your pocket money in piggy banks to keeping a portion of your salary in investment instruments, it is important to start saving early. Saving and investing in the right financial instrument can help investors take advantage of the power of compounding.
Saving early is crucial as even small amounts can create a big value if given enough time.
Be financially aware
Reading and developing financial literacy enables an individual to be in a better position to make financial decisions. Without knowing the basics of money like budgeting, debt, instruments and likes it may be difficult for an investor to put their money at work effectively.
Financial literacy is an indispensable skill for money management. It can be easily be achieved by consistently keeping an eye on the news, reading the vast literature and having an open conversation with your financial adviser.
Have a long-term goal
Formulating a financial plan with all the suitable instruments like equities, exchange-traded funds, bonds and likes is incomplete and ineffective without clear long-term goals and objectives. Investing without a clear goal and vision for the long term can lead to an inappropriate selection of asset classes and it is even more challenging to measure the performance of your investment.
It is advisable to prioritise your investment goals within a suitable time frame for making the best out of your investment.
Invest systematically
Undoubtedly, investing and saving are important for money management and planning for the future, but what is more important is to put your investments systematically. Starting with a systematic investment plan (SIP) and being disciplined with it crucial to reap the benefits of investments.
An investor should consider investing in a planned way via financial advisors or try to Do It Yourself or DIY investment advisors like Tavaga that take care of your money.
The haphazard technique of investing can lead to detrimental investing practices like panic selling and low returns.
Have an emergency fund
The pandemic has been evidence of how not saving for the rainy days can be extremely detrimental. The money that has been set for your emergency fund can help you survive for a few days before hitting the rock bottom.
It is recommended that an investor should invest in high liquidity and low-risk investment instruments like fixed deposits, savings accounts and likes to build their emergency fund.
Avoiding leverage
Resist the temptation to put your money in the leveraged instruments. While the leveraged instruments can be rewarding when markets are rising, however, the long-term consequences can be severe.
Avoid swiping your credit cards and taking up unnecessary EMIs to avoid borrowing that extra cash at unforgiving high-interest rates. The extra cash you borrowed quickly to meet the avoidable expense may leave a dent in your wallet.
Know the financial product
Believe it or not, reading the fine print of the financial product is as important as taking the first step towards saving and investing. A common mistake that both seasoned and novice make is blatantly ignoring the costs and commission involved in the financial product. The hidden costs are often unclear, confusing and hidden behind the industry jargon.
Such unnecessary costs do not affect the quality of your desired financial product but fill the pockets of money managers. If you do not wish to go through the paperwork yourself, always consult a qualified professional before investing.
The author is CEO, Tavaga Advisory Services
DISCLAIMER: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.