Fathers demonstrating responsible financial behaviour serve as good role models for their children, says Anup Bansal, Co-founder, Scripbox.
In an interview with MintGenie, Bansal said that a father has an important role in imparting financial knowledge and skills to his wards.
Edited Excerpts:
Q. How do you correlate a father’s responsibility with his wards’ financial independence?
A father's responsibility is intricately linked to his wards' financial independence, as it encompasses the guidance, support, and resources necessary for their development and self-sufficiency. While financial independence is a multifaceted concept that extends beyond the influence of a father alone, he can play a significant role in shaping his wards' financial journey.
- Providing a stable foundation: One aspect of the father’s responsibility is to ensure a stable environment for his wards, including meeting their basic needs, such as food, shelter, and education. By fulfilling these responsibilities, he lays the groundwork for his children's financial independence by enabling them to focus on personal growth and development.
- Financial education: As a father, he has an important role in imparting financial knowledge and skills to his wards. Teaching them about money management, budgeting, savings, and investments empowers them to make informed financial decisions and increases their chances of achieving financial independence in adulthood.
- Leading by example: When he demonstrates responsible financial behaviours, he serves as a role model for his children. When he exhibits traits like financial discipline, saving for the future, and avoiding excessive debt, his wards are more likely to adopt similar habits, leading to greater financial independence in the long run.
- Encouraging entrepreneurial spirit: A father can inspire his children to be independent thinkers and explore entrepreneurial ventures. By fostering an environment that encourages creativity, risk-taking, and resilience, he can instil an entrepreneurial mindset that can contribute to his wards' financial independence later in life.
- Supporting education: A father often plays a crucial role in facilitating his wards' pursuit of higher education. By assisting with college funding, and scholarships, or offering guidance on career paths, he can equip his children with the necessary skills and qualifications to secure better employment opportunities and achieve financial independence.
- Long-term financial planning: A father can contribute to his wards' financial independence by encouraging long-term financial planning. This may include helping them understand concepts such as retirement savings, investments, and building wealth over time. By instilling a sense of financial responsibility and foresight, he can aid his children in achieving financial independence well into the future.
It's important to note that while he can significantly influence his children's financial independence, individual circumstances, opportunities, and personal choices also play a significant role.
Q. Fatherhood entails financial responsibility. How do you think a father should plan finances to secure his children’s finances in the long run?
To effectively plan his finances and secure his children's future in the long run, a father should consider a comprehensive approach that encompasses various key aspects.
- Start early: Time is a valuable asset when it comes to long-term financial planning. The earlier you begin, the better the chances of accumulating wealth and maximizing returns on investments. Starting early allows for more significant contributions to retirement accounts, compounding growth, and a longer timeframe to weather market fluctuations.
- Set clear financial goals: Define specific financial goals for the future, such as education expenses, homeownership, or starting a business. Clearly outlining these objectives will help you determine the amount of money required and create an appropriate plan to achieve them.
- Create a budget: A crucial aspect of financial planning is establishing a budget that reflects your income, expenses, and savings goals. By tracking and managing expenses, you can identify areas where savings can be increased and unnecessary expenditures can be minimized.
- Invest wisely: Carefully allocate funds to a diversified investment portfolio. Consider a mix of low-risk and higher-return investments, such as stocks, bonds, real estate, and mutual funds, based on your risk tolerance and long-term objectives. Regularly review and rebalance your portfolio to adapt to changing market conditions. Remember to invest separately in your children's higher education.
- Build an emergency fund: It's important to establish an emergency fund that covers at least three to six months' worth of living expenses. This safety net ensures that unexpected financial challenges, such as job loss or medical emergencies, can be handled without derailing your long-term plans or resorting to high-interest debt.
- Teach financial literacy: While it is important to save for your kids' future, it is equally crucial to teach them about money management from an early age. You can ensure that your children get the best education and the best job or pursue entrepreneurship, but if they cannot manage their finances well, there is no difference between earning a ₹10,000 salary or ₹1 lakh salary. Thus, teaching children financial literacy is a must.
Apart from this, a father should also ensure that the family has adequate health insurance as well as life coverage. Consult a financial advisor to plan for the children's financial future in an effective manner.
Q. You are a father to your son as much as you are a son to your father. How do you think the definition of money has changed over the period?
Over the generations, the definition of money has undergone significant changes, influenced by various factors such as technological advancements, economic shifts, and evolving societal values. Money, in its essence, remains a medium of exchange and a unit of value. However, the way we perceive and interact with money has undoubtedly transformed.
In my father's generation, money was primarily seen as a means of survival and a measure of material wealth. It was often associated with stability, security, and the ability to provide for one's family. The accumulation of money was important, and financial success was often equated with personal success.
Over time, there has been a shift in the perception of money. With the advent of technology and globalization, money has become more fluid and intangible. Physical currency is being gradually replaced by digital transactions. I remember my father writing self-checks or filling out withdrawal slips to withdraw money for expenses. Today, we witness the increasing prevalence of credit cards, digital currencies, online banking, and cashless transactions. Concepts like CBDTs (recent launch of the Digital Rupee), and cryptocurrencies, such as Bitcoin, etc, have emerged, challenging traditional notions of currency and opening up new possibilities for financial transactions.
Furthermore, the younger generation, including my sons, have a different outlook on money compared to previous generations. The new generations are growing up in a world where access to information and higher mobility are more prevalent than ever before. Most of them have experienced foreign travel and dealt with different currencies. Since the current generations have seen better quality of life resulting in higher aspirations, many end up stretching themselves and taking on unnecessary debt. This exposure has led to an increased emphasis on financial literacy and fiscal prudence at a much earlier age for children.
The definition of wealth has also evolved. While financial prosperity remains important, younger generations often place value on experiences, personal fulfilment, and social impact. Concepts like ethical investing, conscious consumerism, and sustainable practices have gained traction, indicating a shift in priorities regarding the use and allocation of money. There are many more options for investments today than earlier when my father invested in real estate, gold, insurance policies, and fixed deposits.
Overall, in simple words, the definition of money has expanded from a mere medium of exchange to a complex entity intertwined with technology, societal values, and personal aspirations.
Q. Many people negate the importance of health insurance. From being the father of a toddler to being the father of a college-going ward, what changes do you advise in the structure and coverage of the health insurance plan bought?
Transitioning from being the father of a toddler to the father of a college-going ward brings about significant changes in the structure and coverage of the health insurance plan for your family. To ensure that your insurance plan aligns with the evolving needs of your family, it is important to consider a few factors.
First and foremost, it is crucial to ensure that your health insurance plan provides comprehensive coverage as your child grows older. While routine check-ups and vaccinations were the primary focus during the toddler years, now you need to consider coverage for specialized treatments, preventive care, etc.
It becomes essential to check if your health insurance plan offers a broad network of healthcare providers in the area where they will be studying. Look for plans that include in-network doctors, specialists, hospitals, and urgent care centres nearby to provide convenient and cost-effective care for your child. Access to a reliable network ensures that your child can receive necessary medical attention without unnecessary financial burden.
You should take the time to review the deductibles and copayments associated with your health insurance plan. Adjust these amounts according to your financial situation to strike a balance between affordability and coverage. Ensure that the cost-sharing mechanisms of the plan align with your family's budget to avoid any unexpected financial strain. Also, as you and your child grow, you also need to relook at the coverage for its adequacy. Depending on your family's circumstances, consider exploring additional coverage options such as dental insurance, vision insurance, or supplemental health plans.
Lastly, the mental well-being of your child is of utmost importance during their college years. Thus, look for a health insurance plan that includes comprehensive coverage for mental health services such as therapy and counselling.
Q. Life insurance is the first line of defence sought to secure the financial future of a kid. How do you advise fathers to decide on the coverage amount while buying life insurance?
When it comes to deciding on the coverage amount for your life insurance, you have several factors to consider in order to ensure your family's financial security.
The first step is to assess your family's current and future financial needs. This includes evaluating outstanding debts, such as mortgages and loans, as well as considering the expenses associated with your children's education and daily living costs. Next, you should determine the income replacement requirement, taking into account your current income, inflation, and the number of years your family will need financial support. It's also important to consider future expenses, such as college tuition fees and healthcare costs, especially if you have young children.
Evaluate your existing savings, investments, and assets to determine how much additional coverage you may need. Planning for contingencies and emergencies, such as unexpected medical expenses, is crucial as well. Since insurance is for risk coverage, it is best to take term insurance instead of ULIPs or endowment policies. Lastly, remember to regularly review and update your coverage as your family's circumstances change over time. This will ensure that your life insurance aligns with your evolving needs.
By carefully considering these factors and seeking professional guidance, you can make an informed decision that provides sufficient financial protection for your loved ones while remaining within your budget.
