Thursday, June 12, 2008

My Mum

Last weekend, when I drove to Sis’s for a visit, mum came with. In between shopping, gardening, and cooking, mum asked us something. She needed help. She invested money, which she and dad had allotted for something else, without dad knowing. Now dad wants to use that money for the originally allotted purpose, but market is down and so is her investment.

How much? About $20K! Seriously, if it was a few thousand, Sis and I could help her. But the shear amount raised alarm bells. And it’s ding, ding, ding from there. It’s all invested in one place. She can’t even remember the name. She can’t really tell us what it’s all about. She did no research. Her friend recommended it because it was going up and up.

From talking to her, it was pretty clear her financial knowledge did not go beyond saving money. For example, I was telling her she should have picked her investment type (cash, bonds, Real Estate, equities etc.) according to how long she can do without that money. If this money is not needed right now, she could just wait for the market to recover (provided she chose the right investment). As I was saying this she kept saying :” How was I suppose to know! Everyone said it was good. It did great the first few months!” I don’t think she heard any of the investment basics we tried to explain to her.

Sis’s mother-in-law is similar. Her investments are pretty scattered, buying whatever people say is good. She’s retired now and has a decent pension. However, I was shocked to hear that she was selling her investments to cover extra expenses. Instead she should have restructured her investment to generate a steady income when she retired.

These are two very intelligent women! Mostly I think it has to do with their generation and upbringing, which did not promote the same financial independence and awareness as our generation. All they knew was to have a good job, a good husband, a home that’s paid off, and lots of savings. Being suddenly exposed to the investment world is daunting.

We told mum she has to get all the information she can on this investment she made. Then she and dad need to make a decision on whether to sell at a loss or hang on. Also, in future not to invest in anything she doesn’t know especially large amounts of money.


Anonymous said...

oh no! What an unfortunate experience for all parties involved. The good news is, it was courageous of your mom to step into the investment world. And with any luck she'll become interested in it all the more, given this experience, rather than feel 'burned' and never try again.

I always recommend the site (i think it's still live!) to women just getting started in investing. It's for women, very empowering, and gives the basics in straightforward language. Once your mom is over the stress and can focus, it may be of interest (I suspect she wasn't able to absorb your comments at the moment because her immediate problem is how to recoup her losses, fast.)

Esme said...

Thanks for the link Nancy. Maybe we can look at it after all the drama is over and done with.