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Indian schools are mostly the place where many of them have the best of their memories and best of their knowledge. We learn about different concepts, theories and subjects like physics, chemistry, history, maths and above all so much about unity, discipline, expectations! One thing that is surely missed amidst all of these is understanding or rather I must say glimpse of the real world. Don’t get confused, I am directing towards the most important aspect of one’s life that is Personal Finance.

How we can earn money is definitely taught but the importance of sustaining it is ignored! Many know what Money is, what is the use of it? But how many of us have been taught in school the lessons of Personal finance which mainly consist of learning the difference between Savings & Investment , nature of Inflation and avenues of investment and so on. I wont say changes are not happening, but I wish mainstream schools start incorporating real life lessons and give teaching a much needed makeover.

As it’s been said, “Learn from others’ mistakes, to avoid your own.” Today, I want to call your attention to some crucial learning on Personal Finance in general that unfortunately school never tells you.

Early the better, latter the bitter

The thumb rule of managing finance is “Earlier you start the better you get.” Start with the mindset of savings from the beginning, right when you start getting pocket money. If you have passed that age then teach your kids the importance of delayed gratification. Ideally we waste a lot of time for the right age to arrive, so to start saving or investing. Practically speaking, we all know responsibilities increase and so does pressure when the so-called “right age” knocks. Investing small chunks is easy when all your money is for games, movies and dates. Think of this activity as an internship where you are still learning but feel as if you are grown up!!

Saving vs Investment-

We all know, the digital world has made learning accessible within a reach of click. In fact sometimes it’s too overwhelming with the ocean of information available to us. Now knowing the differences between savings and investment is an easy task. There are many who are still struggling though.

It is said, saving is for our short-term needs and investment is for the long-term, but it can exactly be the vice-versa too. We need to understand our short term, mid term and long term goals and accordingly sieve the earnings into baskets of investment and savings. Avenues to do that are many but without clarity on goals, doing random investments is completely unadvisable.

Inflation-

“Mehangai kitni badh gayi hai!”

We often have heard this line from our parents when we were young. But what is Inflation? Did our school ever tell us about it? One can get all types of definitions now, online or in books but to make it easier to comprehend,Inflation is like that mechanism that slowly gobbles up our savings and brings us to a vulnerable state that reduces our purchasing power.CLICK TO TWEETIt is important to know about how inflation works, especially a much needed term while one is planning to save. Here when dig deeper, it gets clear that savings in the bank will not be enough to beat inflation. One needs to understand avenues of investment to do it.

Liabilities

Being in college we all learnt about assets & liabilities as the basic understanding. And unfortunately if you are a science student in India, this lesson holds no grounds. But it was only limited to companies assets and liabilities to make P&L Balance sheets. However, many of us were never told that there are personal liabilities or assets that need to be taken care of in future.

There is too much pressure already built around the word ‘liability’. First let me reduce that. Asset and Liability in personal finance goes hand in hand. Many of us cannot create assets in today’s life without the help of liability for eg: buying a car or home with a loan. We build assets with the help of taking liability on us. The thing to learn here is what is good liability and what is bad. Here we need to garner more knowledge about asset and liability management for which crucial thing to learn is budgeting. If you need help doing this, the best is to have a financial planner beside you to guide.

Wants vs Needs

Budgeting brings me to the topic of knowing the difference between wants and needs.Like I spoke earlier about delayed gratification. Many of us survive in an environment of instant gratification rather than a delayed one. Therefore we forget this leads to too much pressure on ourselves or our parents and even schools fail to teach the difference between wants and needs. For instance, no school has ever taught the importance of emergency funds whereas more than 45-50% Indians are not equipped in case of emergency. Whereas the E-commerce sales have increased from 30% to 40% in the last year. It’s alarming that people are busy just shopping but not saving.It does not mean I don’t shop but I want to emphasize on the importance of balance in doing both.

Changes happen gradually but we need to be a part of that change! Bring in this thought from the beginning, “ so what if school did not teach us! We can start by teaching our kids – the importance of personal finance.”

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We always hear people saying to young couples “Plan a baby”. This bundle of joy, what we call, definitely needs a lot of planning, not just emotionally, mentally or physically but most importantly financially. As this bundle of joy comes with a sense of responsibility, where one needs to plan a better future for their kid. Financial Planning is the most basic requirement yet not prioritized on top by many parents.

We as financial planners understand the importance, as every parent would want to give the best lives to their children. So this time we would want to simplify how financial planning can make you a better parent!

Pre Plan before planning for a kid:
Many of us already know what our goals and milestones are that needs to be achieved. Many of us might have already even planned for it. However, there are many initial expenses that need to be taken into consideration before the journey begins from being a bachelor to getting married and finally having a kid. As and when we grow in our lives, every stage we live through requires different levels of responsibilities and planning, we all know it by now. So as you and your partner decide you want to plan a baby, you must start an expense kitty at the earliest that will be used for your baby’s expenses. The best option is to invest, now whether it should be in debt funds, liquid funds, or equity funds that depend on the time horizon of your goal. One thing that is sure is consistently saving each month. A financial planner would also take into consideration many other factors like inflation, risk tolerance, market conditions, etc

Protect the known factors:
With financial planning, you will realize the known factors of life. Up until now, as a parent, you might have known it is important to have health insurance if you are planning a family. But the right amount required as per your contingency plan even though your current organization is offering insurance will be explored when you sit for financial planning. It is always better to have personal insurance customized as per our needs and not standard policies. If you have health insurance before pregnancy, you need not worry about hospitalization expenses as it is taken care of. The premium you would pay would also be less along with stress levels for you to enjoy the journey of a newborn.

Education needs:
This is a factor that any parent can’t skip through i.e Education. Every parent wants their kids to have the best education from the best institutes. These emotions of saving your kid from every struggle are evident in most of the parents and the reason most always think is, “My kid should not go through what I had gone through”, isn’t it?

So planning for their career will be the second most important aspect I hope, post your retirement planning. Because it’s not said enough that for kids’ education loan can be taken but for retirement, there is no loan. So depending on the time horizon one must plan their kid’s educational expenses keeping inflation in mind or know about the factors of options available in the market. We usually take 10% to 12% as inflation costs rise. A financial planner will always guide you practically keeping the emotions of being a parent aside and sometimes that’s what is needed to be a better parent.

Educating needs:
Our educational system has limited or no knowledge of finance from an early age. There is no such subject that inculcates the habit of financial planning in kids. Financial planners whilst planning aim to educate you to be a good teacher to them about financial planning and ensure financial literacy is given to them from their right age. Hence you cultivate the habit of saving and investing in your kid.

Some financial plans can go further with marriage, their homes, etc but the best parenting would be to teach them, let them grow, and someday let the kid leave the nest and do his financial planning on his own, just like you did. To conclude it we would like to know some of your viewpoints on the same. As we are just a call away to help you.

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