Growing Your Family’s Wealth: Investing Tips for Parents

Middle-class families in urban India are feeling the pinch, particularly as they raise children in today’s unpredictable economy. A report by Mint has found that parents are spending as much as ₹4.3 lakh on school, medicine, clothing, and miscellaneous costs annually, which has deterred many from having multiple children – or having children altogether. This year, the Reserve Bank of India (RBI) paused interest rate hikes amid rising inflation. However, should inflation continue to trend up, the Indian government may be inclined to increase the repo rate or the rate that the central bank charges when lending out money to commercial banks. This will cause banks to increase their interest rates on financial products like loans, which many families rely on to buy homes and cars and fund their children’s education.

Hence, it’s essential to secure your family’s future by ensuring your savings and profit streams can grow enough to fight inflation. While budgeting and responsible saving go a long way, parents with some disposable income could also consider building wealth through investments, allowing them to supplement their regular salary with passive earnings. Here are a few pointers to consider before investing your hard-earned money.

Trimming the fat

Before you open any kind of investment account, the first step is to speak with your partner about your current budget and lifestyle with the goal of creating some wiggle room for investing. Our previous article “Householding Budgeting: 4 Places You Didn’t Know You Could Cut Costs” outlines some expenses you can minimize, such as your phone bill, dinners out, or kids’ non-essential items. The important thing is to stay realistic and only jump into investing if you have the extra liquidity to do so. If you’re able to, the next step is to find easy ways to manage your investments.

Using analytical tools

As busy parents, you may struggle to keep up with how your investments are doing. A simple and streamlined interface that you can glance at while on the go can be vital. This is where MetaTrader 5 (MT5) comes in. When you download MetaTrader 5, you can access several key markets at once and visually monitor real-time price movements on charts to react to movements quickly. Take advantage of automated trading on MT5 with trading robots or expert advisors, which analyze quotes and carry out operations while you’re spending time with the kids. The trading terminal can also be accessed from your iOS or Android device, allowing you to monitor your account and place trades with just a tap. You can diversify your portfolio once you’ve built your confidence and risk appetite.

Investing in various industries

Diversification by investing in varied asset classes is critical to building generational wealth for your children. This strategy mitigates losses and stabilizes returns so that when one industry is not doing well, you don’t suffer losses across the board. However, you don’t need to stray too far from your comfort zone when diversifying. For instance, you may already have physical commodity investments in the form of gold, which comprises 1.3% of India’s GDP. But because these tangible assets are vulnerable to theft and are hard to store, one option is to jump into the global commodity market to trade digital gold or silver as currency pairs with the US dollar. Another favored Indian investment is real estate, where 51% of household investments are committed. If you are not keen on taking on landlord responsibilities, you can look into Real Estate Investment Trusts (REITs), which are government-mandated to distribute 90% of cash earnings to investors.

As your priorities for your family change — particularly if you’re following “Financial Steps And Tips for Expecting Parents” — so do your risk appetite and preferred asset classes now that you’re regularly updating your household budget and reviewing your financials. It is essential to be guided by your core reasons for building wealth in the first place. By anchoring your decisions around your family’s welfare, you can protect them from an unpredictable financial future.