What happens when children take over their parents’ finances

While their parents prioritize safety, Millennial and Gen Z India’s aim for optimization. They view their parents’ finances not as a pot of savings but as an inefficient portfolio that needs fixing. This dynamic creates a fascinating, often painful, psychological clash.

Here’s a deep dive into why children push for this, the hidden psychology behind it, whether it’s actually helpful, and how to do it the right away.

The psychology: why do children push their parents?

It isn’t just about making more money. The desire to control parental finances often stems from the child’s own anxieties about the future.

1. The dependency defence mechanism

• The deep insight: Many young Indians are terrified of being the sole financial crutch for their ageing parents. With the breakdown of the joint family system and living costs on the rise, children push parents to invest better not just for the parents’ sake, but to protect their own freedom.
• The subconscious thought: “If dad puts his money in a 4% savings account, his corpus will run out in 10 years and I will have to pay his medical bills.”

2. The intellectual validation complex

• The psychology: Growing up, the parent was the authority figure. By teaching their parents about complex things like mutual funds, asset allocation and PE ratios, the children reverse this power dynamic.
• The emotion: It’s a rite of passage. Correcting a parent’s financial mistakes is the child’s way of signalling, “I am an adult now. And I am smarter than you.”

3. Fear of inflation (the silent killer)

• The reality: The younger generations understand inflation because they see property prices and education costs skyrocketing. They see their parents’ ‘safe’ fixed deposits as actually losing value in real terms. This creates a panic response, in which they try to force parents to run faster just to stay in place.

The core pressures: what do they push?

1. Killing LIC plans and FDs

• The advice: Stop these endowment plans. Break the FDs. Put the money in index funds or hybrid funds.
• The friction: Parents view LIC plans and FDs as emotional anchors. An LIC policy isn’t just an investment; it’s a promise they made 20 years ago to protect the family. Breaking it feels like breaking a vow.
• Is it good? Mathematically, yes. Psychologically, it can affect parents’ ability to sleep well.

2. Digital migration

• The advice: Stop going to the bank branch. Use net banking or UPI. Everything is on apps.
• The friction: For an older person, the bank branch is a social hub and a place of trust. A human teller is accountable; an app is faceless.
• Is it good? Often, no. Pushing non-tech-savvy parents onto digital platforms increases their vulnerability to phishing scams and OTP fraud.

3. Estate planning

• The advice: Where are the nominations? Let’s write a will. Let’s consolidate the 15 bank accounts into two.
• The friction: This is the most taboo topic. Parents often interpret this as greed — “are you waiting for me to die?”.
• Is it good? Extremely. Unclaimed deposits in Indian banks are in the thousands of crores due to poor nomination practices. This is the most vital advice a child can give.

When advice backfires

Scenario A: volatility shock (risk capacity vs risk tolerance)

• Context: 30-year-old Arjun convinces his 65-year-old father to move ₹50 lakh from FDs to a flexi cap mutual fund in 2025.
• Event: The market corrects by 15% in 2026. The portfolio is down by ₹7.5 lakh.
• Result: The father panics. To him, ₹7.5 lakh represents two years of expenses. He loses sleep and his blood pressure spikes. He angrily withdraws the money at a loss.
• Verdict: Bad advice. Arjun projected his own risk appetite onto a retiree who has no time to recover from drawdowns.

Scenario B: password paradox (loss of agency)

• Context: Meera sets up all her mother’s investments on her own phone because “mom won’t understand the interface”.
• Result: The mother feels disempowered. She has to ask her daughter permission to check her own wealth. She feels like a child asking for pocket money.
• Verdict: Psychologically damaging. It strips the parent of dignity and autonomy.

Scenario C: paperwork saviour (the gold standard)

• Context: Rahul sits down with his parents and digitizes their physical share certificates (dematerialization), updates their KYC, and creates a master spreadsheet of all assets. He doesn’t change where they invest, only how it’s organized.
• The result: The parents feel like a massive weight has been lifted off their shoulders. The anxiety of messy papers is gone.
• Verdict: Perfect personal finance. This solves a logistical problem without rejecting the parents’ investment philosophy.

Conclusion: how to advise without offending

The child is usually mathematically right but emotionally wrong. But is their intervention good for their parents’ finances?

• Yes, if the focus is on protection (health insurance, wills, nominations).
• No, if the focus is on maximizing returns (equity exposure) at the cost of peace of mind.

The golden rule for children

Don’t try to turn your 60-year-old father into a 30-year-old venture capitalist.

1. Prioritize flow over growth: Parents care about cash flow (monthly income), not net asset value. Pitch products that provide a regular income rather than focussing on growth.
2. The sleep test: If an investment decision keeps your parents awake at night, it is a bad investment, regardless of the returns.
3. Respect the emotional asset: If they want to keep the ancestral village home that yields 0% return, let them. That is not an asset; it is their identity.
4. Don’t use jargon: No alpha, beta, expense ratio, or indexation. Use terms such as inflation-beating, tax-efficient, and government-backed.
5. Don’t take over: Don’t say, “Give me the password, I will do it.” Instead say, “You log in, guide me, and I will show you where to click. Let them use the mouse.

Ajay Pruthi is the founder of PLNR Investment Advisors and a Sebi-registered investment advisor.