We all love our parents, don't we? After all, the entire motive of their lives as soon as we are born is to give us a healthy and comfortable life. And they often leave no stone unturned to make our present as well as future financially secure.
And quite naturally, our parents, grandparents and others belonging to the older generations tend to pass on many financial habits to us. While some habits may indeed be useful and noteworthy, some financial habits are no more than myths and a part of outdated thinking which, when inculcated as a habit by millennials and Gen Z, often does more harm than good.
Even a Greek philosopher once said, “Change is the only constant in life.”So let us deep dive and understand some of the old and redundant financial habits that we should ideally not inherit from the older generations.
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After all, learning from not just your but others’ mistakes is equally important, right?
Financial Habits Youngsters Should Unlearn
1. Making FDs & Gold Your Best Friends For Investment
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Most of our parents, grandparents and other older relatives would in all likelihood have the same answer when asked about their investment choice. Bank FDs, PPF, real estate and gold, right?
This is because their horizon of thoughts and perhaps even their knowledge was limited to this handful of investment options. That is exactly why they blindly believed the biased opinions or hearsay surrounding the ‘risky’ mutual funds and why it's best to stay away from them.They never really made much effort to understand other investment options such as stocks, mutual funds, etc.
While it is true that mutual funds do tend to involve an element of risk since they invest your money in various market-linked securities like bonds and equities, that risk varies across different mutual fund categories and can even be managed through an appropriate asset allocation strategy, which helps in tackling market ups and downs as well.
Moreover, mutual funds not only involve a wide range of categories and schemes that ensure there's something to offer for all investors, across different risk appetites and investment horizons, but even their returns have also historically proven to outperform most traditional fixed-income instruments like bank FD, PPF, etc, especially in case of equity investments over the long term.
So don't end up blindly following the older generations' notion of staying away from mutual funds and stocks. It's all about understanding the investment option and then accordingly investing as per your risk appetite.
Also Read:PPF,Mutual Funds OrBank FD? Where To Invest For Dual Benefits
2. Hiding Finances From Spouse
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One of the biggest financial habits youngsters need to avoid inheriting and in fact unlearn, is of hiding your finances from your close family members, especially your spouse.
Whether it's your salary, any insurance you have taken, any investment you have done, etc., when you get married, you should be open to discussing your finances with your life partner, irrespective of the fact they are earning or not. As a couple, being transparent about your financial ideology and situation helps in avoiding a lot of quarrels, and in fact, helps in managing the finances together.
Moreover, hiding your finances from your spouse may even deprive them of the benefits they deserved, such as your life insurance cover or the bank FDs or other investments which had your family/spouse as a nominee, in case of your untimely demise.
Also Read:Does It Make Sense To Make YourSpouseThe Co-applicantFor Home Loan
3. Assuming A Credit Card Is The Devil
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Whether it's your parents, grandparents or other elder family members, one piece of advice that most of them are likely to give and also follow, is to stay from credit cards. "They are pocket diggers and money eaters, they push you into debt trap."
These are amongst the first pieces of advice people give you when you pitch them your thoughts on taking a credit card. But that is where you need to shun these myths and not believe these biased opinions and hearsay.
Think this yourself- If someone has piled up credit card bills that signal a debt trap, is it the card user's fault or that of the credit card itself? Certainly the card's user, right?
So why unnecessarily demonize credit cards or put them in a bad light? Credit cards are, in fact, loaded with a lot of financial benefits like cash-backs, reward points, discounts, EMI facilities, interest-free periods, gift cards/vouchers, etc., which makes them a boon for your financial life, and not a bane. It's all about how you use and repay credit cards. The choice is indeed yours.
Also Read:How A GoodCreditScore Can Help You Save Lots Of Money
4. Not Recognising The Need To Have An Emergency Fund
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While it's more likely than not, most of our elders, whether it's our parents or others, used to have the habit of budgeting and saving money every month, right? But seldom did anyone talk about having a separate fund for emergencies, right?
Have some money in your bank account, FD, PPF, and the rest parked in gold, real estate etc. That's the most we might have heard of. Having a separate emergency fund is not something most of us are taught or are even aware of.
That is exactly why we as youngsters should take the covid pandemic and mass layoffs as the biggest wake-up calls to realise the importance of having an emergency fund in place.
For the unversed, an emergency fund can help you to tackle the financial aspect of life’s exigencies which are capable of harming your income inflow temporarily, such as a sudden job loss or severe illness.
The size of the emergency fundto deal with rainy days of life should be at least six times your recurring monthly expenses like EMIs, rent, SIPs, utility bills, insurance premium, etc. You can go ahead to create a larger corpus like 9-12 times your expenses if your finances allow so. After all, the bigger your rainy-day fund, the larger cushion you have to fall back upon during hard times.
5. Taking Decisions Without Understanding Financial Jargon
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Blindly relying on a financial advisor, taking investment decisions by believing advertisem*nts or following the advice of a friend or relative without understanding the financial concept are some of the blunders people often used to do not just in earlier days but in fact to date too.
What all these blunders have in common, is the root cause- lack of financial knowledge. As soon as we hear words like insurance, income tax, mutual funds, stocks, etc, we tend to run away from such jargon instead of attempting to understand them. At least the basic ones.
After all, it's the lack of financial literacy and awareness that often tends to make us ‘jargon averse’ and reluctant to learn about financial products, which at its worst leads to incorrect decision-making that harms your financial health in more ways than one.
So, as youngsters in their 20s or 30s, or in fact at any age, it's never too late to learn. So start using theplethora of mediums on the internet to learn from, whether online financial portals aimed to simplify the financial world for you, or personal finance channels on YouTube. There are endless ways to gain financial knowledge in today’s digital-first world.
Moreover, you can even develop the habit of regularly reading such portals, business magazines, financial/mainline newspapers, video channels etc. to grab hold of a basic understanding of various concepts.
Gradually, this not only instils the willingness and awareness to deep dive into learning more but also enables us youngsters to become confident enough to make the right financial decisions at the right time and not get carried away by the tons of sales pitches and advertisem*nts luring you towards putting your hard money into them.
Change Is The Only Constant In Life
Last but not the least, remember that our parents and other elders from the older generation love us a lot, there's no doubt about it. But it is said, change is the only constant in life.
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So, while you should definitely inculcate all the healthy financial habits from whoever possible, there are some financial habits, like the above mentioned ones, that can do more harm than good if learnt and implemented. So don't let such unhealthy financial habits limit your horizon of financial planning, and unlearn them as soon as possible.
Also Read:5 Tips To Buy HealthInsuranceForParents
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