Making financial life simple for senior citizens

A friend of mine has been running around for the last two years trying to get her parents finances in order. Her father suffered a stroke two years back and her mother also came down with a disability. All of a sudden, she was thrust with the responsibility of taking care of her parent’s finances. And what a difficult journey it has been.

Firstly, she had to figure out their investments. This was easier said than done, as there were multiple small investments with no electronic record of the same. She had to go one by one through each investment to understand where and when it was done. There were fixed deposits, non-convertible debentures (NCD), mutual funds and shares, which had not been dematerialised. To top it all, there were some shares, which were held in a custodian account overseas. These were shares that her father had received during employment.

Dealing with each investment was a new experience for her. The fixed deposits were in different branches across the city, opened at different times. She spent considerable amount of time consolidating the deposits. Not to mention the 4-5 hours taken in each visit due to long-distance travel.

The NCDs and company deposits were invested in for higher interest rates, which they offered. Thankfully, none of the NCDs held defaulted, but if they had, her parents would have lost a good part of their life savings.

Her parents had invested in the mutual funds on the recommendation of their banker who sold the fund saying Fund A has given 15% return in the last 2 years. I have come across many investors who believe that past returns are guaranteed returns and there is no risk involved.

She is still trying to recover the unclaimed dividends of shares held from IEPF and is facing difficulty due to mismatch in her father’s signature. For the shares held abroad, most banks are not willing to open the account if the value of shares is below a particular amount. She rightfully remarked to me “it is easy to invest, but so difficult to close an investment”.

Along the way, she found out that her parents had taken a loan against a fixed deposit. She discovered this by chance when her mother suddenly told her to close the loan. Turns out the loan has been there for last 3-4 years and the parents are paying 9% per annum (compounded monthly) interest for it.

It is very normal during the course of one’s lifetime to accumulate investments in different places but it is also important to have a hang on these investments/holdings. In the case of her parents, their daughter has spent lot of time and effort in getting things in order. Here are some dos and don’t s that you can follow to keep your financial life uncomplicated.

- Have deposits in 1-2 banks with a good capital adequacy ratio and in a bank branch close to your house.

- Don’t fall for high-interest rates. Any institution which gives 2% more than what major banks give is a big No. Stay away from NCDs and other instruments where the concentration risk is very high such as gold savings scheme from jewelers.

- Plan an emergency fund that can be easily accessed at the time of need.

- You can invest in mutual funds with surplus funds but remember that equity returns are volatile and you can expect good returns only in the long term, which is 7-10 years. - Make a will so that you can pass on your assets the way you want to. Ensure you have nominations in place.

- Stay away from loans. Better to sell some gold, than take a loan

- List down all holdings like bank accounts, insurance policy, investments, jewellery, loans, etc. in a spreadsheet or on paper.

Finally, as you age, consolidate accounts and limit the number of investment instruments to make your financial life simpler for yourself and your family.