Do you invest in your child’s name ??

Just read a post on IHM’s blog and although that is a completely different problem altogether I kinda was appalled at the situation of the parents.

Working as an Investment Advisor I so many times get requests from a lot of people to invest in their child’s name. At most instances I try to reason with the parents why invest in a child’s name ?? I always recommend them to be nominee’s and not investors. My reasons are simple unless you are worried about the tax on the interest that the investment will get there is not reason to invest on your son’s name. Some very high profile clients do it just so that they can evade tax. That is one logical reason but other than that there really is none. Its only an emotional reason, some tell me at times, if I invest on my child’s name I will not withdraw the money. Its better to get some discipline rather than make such excuses I feel.

It is prudent to always invest in your and your spouse’s name, ideally the spouse should be the nominee in all your investments it is only after death of both parents that the children should inherit the money. As responsible parents we will always plan and provide for our children. However, it is foolish to invest everything in their name or pass away your belongings to them too early. It may sound over practical, but we were always taught while learning financial planning to always have a huge amount to leave as a legacy, for it automatically ensures your children take good care of you. I am not saying all children are like that or not, but the point is about doing it logically and correctly and not let a situation arise where in your retirement you have nothing in hand and are left demanding from your children. Time should never be tested, you should always plan well for your retirement. It is as important as planning your child’s future.

Also if I may digress a little bit here :

Many people even buy insurance for their children, which is the most rubbish thing you could ever do. I do not even understand why IRDA allows products where they allow life insurance of any kids who are not generating any income. If ever there should be any life insurance it should always be on the person who is earning an income be it father or mother never the child. If the person earning an income dies insurance can compensate for the income, not for the person. Taking insurance on your child’s name is the most foolish thing you can do. Insurance is an expense not an investment.

Just thought I should pour out a few thoughts in my mind after reading that post.

 

Related posts :

Retirement Anyone

Constructing an Investment portfolio

Stock Market = Casino ?

Advertisements

18 thoughts on “Do you invest in your child’s name ??

  1. Indian Homemaker says:

    Well said Hitchwriter. I also feel parents should not hesitate in accepting rent from children, if they are sharing a house, because that way the money they get is their own and not ‘help’ from the children.

    • the ghost who eats says:

      Actually makes sense… maybe sometimes we do not say it in those same exact words… but its pretty much simple that the kids have to contribute in the house… ideally if there is sensibility of responsibilities there should not be a problem… however when a parent sees a child not understanding what he is getting free… they should always make him/her realise it. Nothing wrong in it.

  2. Sampurna says:

    Please write more about investmentonomics. I’m a spendthrift and I fear I will never be able to stop myself from spending unless I somehow put all my cash away somewhere out of reach. And I just don’t understand anything about investment. Excuse me that this comment is completely off topic, but here’s a classic case of someone who is incapable of making any financial plans – retirement or whatever – and ends up paying taxes to a “chor” govt. What do you suggest? 🙂

    • the ghost who eats says:

      Welcome here Sampurna 🙂 🙂

      Oh when I write about investments all my readers run away so I kinda refrain 😛 😛 but I just added the related posts in the above post… hope they are useful to you ! 🙂 you can always mail me questions you have 🙂

  3. psharmarao says:

    I am an only child and still whatever assets my parents have are still in their name and I asked them to make a will which is considered to be oh so passe in India.
    As a woman also I believe it is so important to have a sense of “your own money” rather than giving all of it to your spouse or children to handle.
    very informative and reassuring for someone like me who is often labelled “selfish” because I believe whoever inherits my financial assets would have to wait until I die.

    • the ghost who eats says:

      Its not about being selfish but being clear and correct. Without a doubt the financial assets should be inherited after a person dies. Life is too long and taking care of old bed ridden people is pretty boring and at times people suck at it. I am pretty clear about that in my mind.

      I had a Nani who had made her will when she had her first attack at 55, although she lived for 96 years she always had a will and thanks to that everyone in my family accepts it easily that there should be a will. 🙂

  4. Sandhya Kumar says:

    I agree with you, Dhiren! Giving education to the children is our prime duty. We should take care of them until they start earning well. Then we should take care of ourselves. After our lives, the children are going to inherit everything.

    • the ghost who eats says:

      Trust me, I have worked for a life insurance company earlier and its best not to mix investments and insurance… a simple term insurance is enough… invest anywhere in post, ppf, fd, shares, mutual funds, stocks, gold or land… but in insurance… ! 😐

      Take that from me ! 😀

  5. Saritha says:

    I don’t understand why parents wants to invest money on kids?? By the time they know that parents did some investment they would have been big enough to earn by themselves…You very well said as parents we should give them education so that when they grow we don’t need to support them….

    I have health insurance and education insurance for them that’s all.

    Your blog looks awesome….

  6. Ashwathy says:

    I so agree. I’ve personally seen parents transferring investments to their child’s name, only to have things go awry later, specially when the concept of each one on how to use that investment goes for a toss.

  7. My Era says:

    Thank you very much Hitchy for reassuring me that my parents & I have been doing the right thing so far. Money, irrespective of it’s amount (whether too much or too little) always bears good fruit only when handled well.

    Coming from you I know it is the best advise. It is this way in my family and I am going to make sure it stays the same when I will be in my parent’s shoes.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s