So here is Children’s Day – a good day for parents and children to take stock financially speaking!

Most parents like to think they are helping their children by helping them financially. Especially if you are doing well – but in many cases even if you are not doing so well. Take the case of Amitabh Bachan – a bungalow in Juhu was anyway within the reach of Abhishek and Aishwarya also!

However even assuming that it was not there was a good chance that the “successful father” would have gifted it! Most parents love their children and want the best for them. And they want their children to have an easier run through life than they may have had. Consequently they tend to spoil their kids a bit: certainly the kids almost always get more material benefits than their parents had at the same age.

And they keep talking about how difficult life was for them! If your parents grew up in India during the 1960s and 1970s you will hear horror stories of queues for ration, milk, kerosene, etc. However, they will continue to spoil their kids. Helping children financially is not a good idea.

One 23 year old girl told me “I just want a small wedding, but if my parents want a “tamasha” of a wedding, let them pay for it. Completely correct. If you pay for your daughter’s wedding, it is not because the kids want it, you wish to show off to your friends, relatives, colleagues etc. Children who receive significant financial assistance from parents tend to under-perform in the income and the asset accumulation stakes in their own personal lives!

May be the knowledge and expectation of regular financial assistance takes away the imperative of working hard for oneself. The children may not be hungry for success, and may not feel the need to work hard and generally plan for their own financial successes. I know of many successful lawyers and doctors whose progeny is no patch on their parents. I know of a 40 year old who still keeps talking of his father as a great success – he now has a major complex!

Of course one exception is education: financial assistance to allow children to maximize their education almost always makes sense. Education is NORMALLY an excellent investment. And the return on investment is almost infinite. I earn more per month than what my father spent on my education THROUGH OUT MY CAREER. Other exceptions can be found – medical help, a short term loan to bail out of a difficult situation, paying for term and medical insurance, a start up with a small capital requirement, etc. However it is better to structure all these as loans (or gifts) properly documented and transparent to all the other kids.

Nevertheless, as a general proposition financial assistance to children is not a good idea. The child buying his or her own home incites strong emotions for parents. Parents can be anxious that the child buys well and gets a good home in a good location. If ever there will be financial assistance, it will be now (even if the parents are not doing that well themselves). I am still against this. Funnily in India sons being helped by their parents is accepted but a father-in-law helping a son-in-law is emasculating!

I know of a doctor who wanted to insure his daughter – I convinced him to insure his son-in-law! After all, his daughter needed protection. It was a difficult sale, I can assure you!

Another doctor’s wife was delighted to tell me about her daughter’s recent wedding to another upcoming dentist. The daughter was looking after the parent’s practice and the son-in-law was a dentist practicing in the same area. The parents were looking for a suitable house for the young couple – and the budget was far, far beyond the young couple’s budget for sure!

The elder couple wanted to pay about 70 per cent of the cost! Will tell you what happened in a later post!!