Insights

Two cases where you should NOT follow your parents’ advice

April 27, 2017 . Akash Kapur

Parent's know best, but not always - usually in the case of career choice and investing (image: annoyed girl, blocking ear)

Parents are a key part of most people’s lives. They raise you, educate you, and play a major role in making you who you are. People often seek their parents’ advice in times of crisis, and rightly so.

They have many more years of experience than us and know better about how the world works.  Plus, they usually have your best interests at heart. Thanks to this, they can prove to be excellent guides in most cases.

However, this does not mean that you should blindly obey your parents in everything. You need to be able to think for yourself and base your life decisions on more than just what they say. In the next few paragraphs, I’m going to point out two instances where simply following what your parents may tell you could be harmful to you.

The first is your choice of career. Parents often want their children to do what they think is best for them – where best either means the ‘safe’ and ‘secure’ option, or the option the parent(s) had chosen, or wish they had. Sometimes this ‘best option’ and your interests may align perfectly – in which case, there’s no trouble at all. You can happily continue down the path in question.

However, there may be (and often are) cases where your interests and what your parents think is best are at odds with each other. In such cases, if you’re sure about what you want and what’s  right for you, I’d suggest doing everything you can to convince your parents to let you do it (or do it anyway). After all, it’s you who has to live with that career choice for a good part of your life. It may as well be something you like.

If you’re not sure, weigh the pros and cons of both options and then come to a well-reasoned decision. In situations like these, simply obeying your parents can often be a recipe for unhappiness. The movie ‘3 Idiots,’ all the hyperbole and larger-than-life antics apart, highlighted this problem fairly well.

As for those of you who are languishing in a course that was not of your interest – fear not. These courses need not be the end of your dreams. Look at me: I did a B. Tech in Civil Engineering and now I’m doing what I like most – writing.

The second place wherein your parents’ well-intentioned advice may cause you trouble is in the field of investing.

Our country and the markets have come a long way since the heydey of Fixed Deposits (FDs) way back in the 80s and 90s. In the current market scenario, FD is no longer king, and your post-office schemes aren’t faring any better. From tax-saving to building wealth, there are many better-performing investment options available in the market for each of your goals.

However, as it is with technology so too it is with investing: Your parents may not be up-to-date on the latest happenings in the market. Plus, thanks to loud disclaimers, their unfamiliarity with mutual funds as an investment option, and the general media fondness for hyping up any market occurrence, they may actively discourage you from investing in mutual funds or stocks. After all, all they “know”, from very selective sources, is that people lose money in these investments. (Fun fact: The longer you invest, the lower the chances of you losing money in the markets – if you invested in stock market indices for 7 years or more, you would not have made any losses! Click here to know more.)

So, when you ask your parents for advice, they are likely to recommend sticking to your EPF, PPF, and FDs, which give you the ‘safety’ of guaranteed returns. However, post taxation – especially for those in the higher tax brackets – the returns from these instruments aren’t all that great.

Mutual funds are a far better option, especially for building wealth in the long term. They are managed by experts, are fully transparent, and can work in your favour, if invested with the right know-how.

Even an FD that returns 7.5% (which will place it in the category of the highest returning FDs in the current market scenario) will deliver just 5.2% in-hand for those who belong to the highest tax slab. On the other hand, long-term debt mutual funds alone have delivered an average return of 8.6% over the last 3 years. What’s more, they also give you tax benefits when held for over three years – a fact that makes them even more attractive than FDs.

For long-term investment needs (5 years and more), there are equity mutual funds that offer much better growth than FDs. They have delivered double digit returns (13% for large-cap funds) over the past five years. The best part? All your gains are tax-free if you hold your investments for more than a year!

This makes them a much better candidate for wealth-building than traditional options like FDs, PPF and the rest. Not only do you get higher growth on your money, you also get to keep all of it!

So, remember: your parents mean well, but their advice may sometimes not be the best. If you’re at the stage when you’re planning your career or if you’re about to start investing, do ensure you do your own thinking and research before you decide.

It may be the difference between a stressful future and a happier and wealthier life.

All returns as of April 26, 2017. Source: MoneyControl.

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