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| Capitalstars investment advisor |
While most investors earmark their savings for specific purposes in order to be disciplined, in reality, wealth built over the years is a fungible amount. The question is should it be used based on the changing priority of the household.
Varun has been investing for his son from the time he was born. The boy will soon turn 18 and need the sizeable corpus accumulated so far for his higher education. However, Varun’s financial condition is not very good at present.
He joined a startup at the height of the boom and is now without a job after the business failed. Varun’s wife feels they should dip into the corpus saved for their child to tide over things. Would that be the right thing to do?
While most investors earmark their savings for specific purposes in order to be disciplined, in reality, wealth built over the years is a fungible amount that should be used based on the changing priority of the household. Even though it was earmarked for Varun’s son’s education, the corpus that has been built was created from the income of the household and should be available as the need arises. However, it is an emotionally tough decision for a parent to make.
Prioritizing financial goals is a problem many investors face. If Varun allowed the corpus to be used only for his son’s education, he may be left that much poorer in his retirement. Without a job, he will need funding for the family’s needs, and he will not be able to accumulate a corpus for his retirement unless he begins to earn. Varun should persuade his son to take an educational loan, and bear at least a part of the cost of his education from his own income.
After the KYC formalities have been completed by his son and investments have been updated in his new adult status, he will have to add the father/mother as a joint holder, where possible, or redeem the investments to enable Varun to access them. Varun will have to discuss his finances with his son, and take a decision keeping all the needs of the household in mind.