I convinced my spendy parents to open up an investment account with $10,000 (nearly their entire savings, unfortunately). The back story is, I've been trying to get my mother to save for a long time, but she didn't understand the big picture of
why anyone would do that and what the benefit was of having money "sitting around."
She recently complained that she had this money in the bank and was upset that it was just losing value each year. (She doesn't understand inflation, per se - just that she can't buy as much with her dollar as she used to be able to.) I used this as an opportunity to explain investments, and show her (for the first time) my investments which had earned ~$200 in the past month. I think if I can show her that her money can make her more money, she will be more motivated to save rather than blow her money away.
So I'm opening up a Fidelity account for her. (She's not a permanent resident in the US yet, and so Vanguard asks for documentation mailed. I know this will just freak her out... baby steps...) We're going to be putting in $5,000 to start, and - hopefully - adding money periodically. I need to come up with investments for her, which is where I need your help. (Both in terms of asset allocations, and funds you'd recommend.)
General guidelines:
- The investments need to be super conservative. I need to build trust with her here, and I know if she sees she lost money she will freak out and want to withdraw.
- They need to provide better returns than a money market, or savings account. (This one is kind of obvious, but she needs to see the money working for her)
- The investments need to be fairly liquid (she, in all honesty, will probably not need to withdraw the funds in the short term, but wants to be assured that she can access the money and someone isn't "taking it away from her.")
My parents are super spendy and have basically no financial literacy. I want to introduce them to investing, hopefully be able to show them the benefits (without initially getting too technical; if this lands, we can get into that), and give them an incentive to save and invest. Any advice here is much, much appreciated.