Your Parents are not your Emergency Fund. Your Children are not your Retirement Fund.
Those two are strong and thought-provoking statements. Isn’t it?
I am sure many of you will be having a bit of a gut-wrenching experience right now after reading the title of this post. And many of you will also be feeling scared about your financial unpreparedness. But if that is not the case, then you are a lucky person who is doing just fine. You are not dependent on your parents for handling emergencies. And you are also well on your way to create a big-enough retirement corpus, which will not make you dependent on your children for post-retirement expenses.
But if you do depend on your parents for getting out of financial emergencies and you think of your children as your backup retirement plan, then I have only one advice for you.
You need to do something about it urgently. And you need to do it now.
If you are young or middle-aged, and if you still need to ask for money from your parents to get over financial emergencies, then something is wrong somewhere. Isn’t it? Now when I say financial emergencies, I am not talking about taking money from parent’s to invest (generally people do so to buy real estate/property). I am talking about instances like regularly running out of money before the month ends, being unable to pay credit card bills in full and on time, car loan EMIs, etc. If these things happen once in a while, it is fine. But if such occurrences are regular, then you know that there is a problem. Either your expenses are exceeding income unnecessarily or you are not planning your future expenses properly. The situation can go out of hand very quickly. I have seen it happening with my well-earning friends. They earn well. But they are still broke for all practical purposes.
Creating an Emergency Fund is one of the first things any young person (or anyone who hasn’t done it) should do. Remember that emergencies don’t wait for an emergency fund.
A good target for this fund can be to accumulate 6 month’s worth of expenses (including EMIs if possible). It might sound tough to do. And I will not mince any words here – The fact is that it is not easy when you begin. And when someone has a habit of spending a lot (even more than his/her income), it is all the more difficult. But it is the right thing and it has to be done. Also, even if your parents are financially capable of helping you in your financial emergencies, don’t build that thought into your financial planning assumptions. Stand on your own feet. Your parent’s have already done a lot for you in the last few decades. Why treat them as your Emergency Funds now?
That was about parents and taking their help for current expenses.
But what about your retirement plans? Are you doing fine? Are you not sure about it? Or you know that you are not doing fine? If your idea of retirement is that your sons and daughters will (happily) take care of you in your non-earning days, then, frankly speaking, I don’t know what to say.
I just hope your children do as you expect them to do. And I pray for you. 🙂
Because if they don’t, then it’s will be a very scary situation to be in.
No one wants to end up in an old-age home. I have been there a few times as we regularly donate a part of our family income for helping old people. And what I have seen there is beyond words. One can only feel the pain of senior people when one visits such places. My suggestion to readers is that at least once, everyone should visit an old-age home. You will only realize what I mean when you are there.
But coming back to our main discussion – if you are not preparing well for your retirement, then that is wrong on your part. Plain and simple.
See… I am sure you have full faith in your children. But not doing anything on your own is a clear case of inviting trouble. Now I may sound wrong here, but if you are spending every rupee you earned on your children’s education and marriage, and are not planning to save much for your retirement, then you got it all wrong. Do read Saving for Retirement Vs Children’s Future.
I know that helping your children is no doubt your responsibility.
But so is helping your own older self in future when you are earning ‘zero’ active income. There is absolutely no justification for not doing everything in your power to ensure that your retirement is comfortable.
Remember that you only get one shot at retirement. And you don’t get loans for retirement.
So to cut the long story short, if you think that your children are your retirement fund, then you are neither being fair to yourself nor to your children. And you need to do something about it urgently. And you need to do it now.
So maybe its time to pull up your socks and plan your finances properly. You can’t just focus on one goal at a time. We live in a multi-dimensional financial life where different goals like children’s future, your retirement, house purchase, travelling, taking care of elders, etc. all compete for your income and savings. So instead of randomly investing here and there and end up with a directionless portfolio that goes nowhere, do yourself a favour and get yourself a proper financial plan.
Here’s is how you do that –