Nurture that hidden potential

Last fortnight has been quite happening across the world -

Positives first - 👍

• Pharma companies across the globe claiming to successfully develop Covid vaccine with initial clinical trials, like for example Gilead's Remdesivir launch with Cipla in India, hopefully the trials should go well & we may see a vaccine soon. Fingers crossed. 
• The world has opened the economy again, albeit with lot of restrictions, needless to say, something is better than nothing. 
• The global liquidity has kept the markets in uptrend so far, however the question is for how long ? 
• Crude Oil is back to its normal zone & is stable since last few weeks.  

Not so good news - 👎

• Corona virus cases in India has been increasing every single day, though the patients recovery rate is significantly higher than the casualties. 
• New Corona virus wave in USA, now they are scoring at the rate of 50,000 per day. 
• China flexing its muscles by instigating their neighbors in a bid to prove to the western countries, esp USA, that they are biggest power in today's World. Xi's ambition to conquer nearby territories by financially suffocating and militarily pushing their foot in is somewhat comparable to the ambitions of Hitler who was doing the same with his neighboring states though only with its military powers.  
• India is certainly affected by Chinese aggression but not going to bow down however neither China nor India can afford a war with their depleting economies. Needless to say, India is an emerging power in Asia & the Chinese have underestimated its consequences earlier, however now they are making up for it & creating all kinds of efforts to dilute the Indian presence across the World forums. Under current leadership India seems to be in safe hands. 

Sorry, I got distracted but promise next time news will be single liners. So, this gets us to the main topic which is yet again related to the personal financial health though predominantly involving kids and teenagers. Every kid has a potential hidden within which can make him/her a financially strong & independent person, we just need to bring that out. 

Educate them as early as you can : 

Often kids while growing up takes the cues from people around and they get easily influenced by what they commonly see around just like a lamb which follows the sheep and always remains in herd and has no idea how to survive all alone. There are lot of distraction these days with internet accessible with mobiles and lot of other gadgets and the more they have internet time, the more they get drifted away with the ever so changing gaming and gizmos. Taking cues from parent to spend money on gadgets is the first thing kids learn these days whether the gadget is actually useful or not is rather a question remained unanswered. The thing is that what we need to educate children about the value of money which we ourselves have forgotten. I often tell my daughter who is just five year old, that a game which can stimulate her brain to develop new skills like memory game, constructive game, puzzles, and games involving reflexes, eye hand coordination etc etc are going to be fetch her much more benefits than the barbies & frozen girls.  Whenever we get change in coins, I often ask her to put it in her piggy bank & we will check how much she has saved on her next birthday, if you tell them it is like a game and you will win only if you get more number of coins than what she had on her last birthday, now she does not miss an opportunity to check with us if we got some change after our veg or grocery shopping.  It at least make her aware that this way money can be stored and accumulated, for her age it is sufficient learning. 

Prudently spending pocket money: 

Once your child goes to higher standards  & junior collage, you can give them a lesson on managing their pocket money & how to use it prudently. Firstly fix up an amount which the kid is going to get for an entire month, do not change this value every month. Explain the kids how much money is sufficient for their monthly expenses, even if the kid negotiate for more, give them 10% more than the agreed expenses including misc. Now you need to also tell them, that since you are giving this extra 10%, in no ways additional money will be added to this value during a month. You can also tell that what ever they are able to save that month, that money will belong to them by keeping it in home fund which is managed by parents & after 1 year all these deposit will yield 20% returns. This will help developing there saving skill & using money smartly and wisely. It is then parents responsibility to make sure than 20% tax free interest will be provided at the end of year. This way they will save their money with the prospect to buy something they desire. This is the start of their financial journey. 

Starting on their own: 

During my school days, I had a friend who created his own library by buying old comics from the Raddiwala* (I am not sure if their exist a synonym in English) and used to rent it out for the day at a rate of 50 paisa to a Rupee. He must have made atleast Rs 1000 during summer holidays just by renting comic books to a class full of children. Well, yes he had found a way to make money that early in his life. This is just an example, but the habit of asking your child to develop ideas so that they can make money will create that attitude of finding new ways of running financial life if something goes wrong in future. While teaching them compound interest do not only teach the theory, tell them the practical usage of it. They can chose any field of their liking but the most important thing is financial independence, which can save them in tough times like job losses or during such pandemics.   

Investing early:  

Lastly I am reiterating that investing right at the start of career or when they are about to leave their student life, is the best way to become rich. If you can invest a fixed percent (stressing on % because income may change year on year, but investment % should not change to lower value, increasing it on the other hand is smart thing) of your income every month in a wisely chosen product, they will be creating enormous funds for themselves when they start their own family. 

So nurture the hidden potential of your child which can make them financially educated, well versed & independent. Have a great weekend all of you. 👍

"AN INVESTMENT IN KNOWLEDGE ALWAYS PAYS THE BEST INTEREST"

                                                      ~      Benjamin Franklin  

THE MIDDLE CLASS AND THEIR FINANCIAL STRUGGLES

I have experienced that many of us do not like reading about finance & unfortunately this topic does not attract many readers globally especially in the age when you have many other interesting avenues to entertain yourself like the ever so happening social media, whats-app groups, the Netflix and the Amazon primes,  the virtual gaming zones,  the daily television soaps, the fiction & non-fiction reads other than finance and accounting, and of course the tik-tok saga, and the list goes on and on. The subject FINANCE itself makes a person nervous & makes him/her think that he/she has to read and understand something which is very difficult to understand & is very boring. However it is not that difficult to understand if you do not go deep into financial jargon like accounting, cash flow statements, the EBITA and the PBT etc & believe me it is the only subject which is connected to all of us, from a tea vendor to the richest man on this earth, from musicians, engineers, entrepreneurs, businessmen, designers, doctors, sportsperson & to all possible professions, it is important to manage one's own finances to survive and prosper in this challenging environment. 

Well friends, what we are really missing out on is the most important aspects of our lives, our own financial health, which makes or breaks our desires to become rich. I would have loved to gain this knowledge some twenty five years back when I was still in my high school, things would have been different. Since last couple of years, have been reading and understanding lot of things related to finance and investments, so the purpose why I am writing is to pass on this knowledge & help the people who are really struggling in current scenarios of global recessions, uncertainty, the layoffs & the effects of global pandemic which is not going to go anywhere any soon. 

Having said that, please note the great human race has always prevailed in past during various disasters, pandemics & world wars & will prevail once again & another civilization will evolve. 

The point is how do we as an individual survive when there is so much at stake & that is where the money management and your financial health will make you weather the storm. However to do that you need to open your mind & unlearn lot of things which our parents & generations before them have taught us. Like most of middle class families, parents work very hard day & night to earn just enough to make sure their children get good education and a well settled jobs which is socially accepted approach towards life. Unfortunately we do the same thing to our children and the tradition goes on and on. We also unintentionally teach our children that clinging on to our jobs like the only love of life, day in and day out is the most important investment of time & also cribbing about the high taxes which we pay to the government is a normal frustration of every working class citizen. 

Power Of Compounding, building your wealth

We must learn to inculcate good habits of investment & developing assets to our child right from a very early phase of their life. The biggest problem with us is that all through our working lives we accumulate liabilities & do no create any asset. We run a rat race, day in and day out just to maintain a socially acceptable lifestyle and forget our important goals of creating assets and end up creating more liabilities. 

1. Start early -

Investing in assets from a young age gives your money a compounding effect which multiplies your asset column multi folds if you have chosen the asset carefully. If I had invested just Rs 1000 during dot.com boom in 90's or in first decade of 21st century in companies like, TCS or Infosys, my Rs 1000 would have become Rs lack in just 10 years. However the learning we have got since childhood is that the banks are safest bet & the fixed deposited are safest, we tend to forget that even the banks fail, the interest they give is again taxable, so the actual return is much lesser if you also add inflation to it, as the Rs 100 invested last year is valued only Rs 98 after a year, so do you really think it is a wise investment ? May be if you hedge your portfolio, and divide your hard earned money in terms of risks, then yes, some part of investment should be band deposits but not all. Please note that neither FD, nor mutual funds, nor equities are safe investment but then you need to be prudent enough to diversify your risk profile & give time for your investments to blossom. You can not become rich in a fortnight unless you find a gold mine or win a lottery. 

2. Build Assets - Invest in good companies, the products which you use on daily basis, like toothpaste, have you ever seen who is manufacturing it for you since ages & is the product going to be stopped ever ? Ofcorse not, no one is going to stop brushing their teeth from one fine morning, so invest in such companies, this is just an eg, you can relate it to any product you use in your daily life, from a pen, to a ear bud, to the gold ornaments you have, someone is making them for you, and someone is also making money from it. Another example is Pidilite, day in day out you use fevicol, feviquick, m-seal & so all, what they do, they make only adhesives but they are world leaders in adhesive sector, and they cater to almost all industries be it educational institutes, arts and crafts, real estate, cement, carpenters etc etc.  Invest in businesses which have enthusiasm to develop new products to serve their customers better. There is a reason why companies like Hindustan Unilever, Dabur, P&G, ITC, MRF, Maruti and many more have grown multi-folds & have given multi-fold returns to their stake holders, You just need to be attentive & be a good observer, ideas of good investment may come out from your day to day life. 

3. Jobs - yes having a job and progressing in it is a very good thing but then it should not distract you from your own personal goals of money management. You are so engrossed in your jobs that you forget to learn new skills, to invest your hard earned money to build assets, instead you are busy in acquiring lifestyle liabilities, like expensive cars, phones, i pods, and so many gadgets. Do you know the middle class is the biggest consumer of such luxuries which normally they cannot afford and so they use credit cards to add further liabilities. People often tell me that they do not have any extra money to invest and they live like hand to mouth every month after paying for everything, what they fail to understand is that there is something wrong in their spending habits, You know the rich people do not buy luxury instead they acquire the services or companies which provide them. One fine day when a disaster strikes like a carona pandemic now, then your job which you loved the most & invested most of your time into may betray you and you are left with nothing, no assets, no new skills & sometimes the confidence too. It is important to love your job but not to the extent that you are totally dependent on it as disasters does not give you time, they just shock you. Your one of the biggest asset is Learning, never say no to Learning. 

I have seen people who earn handsome salaries but they still struggle with their financial health & hence could never make the money work for them. 

4. First House - Buying a dream house, your first visible to world asset, is a good investment but buying a second house may not be a good idea as it not only adds to liabilities in terms of maintenance, house tax, stress related to theft, but also makes your money stuck in it unless you really find a buyer to sell at a good price to gain profit. Rather invest in commercial spaces if you have money, it will generate rentals and you are building an asset. Buying real estate was a good idea a couple of decades back till last 5 or 7 years, but the same may not work now, so you need to also understand where the economy is going to boom. Economic scenarios may change with time & so does your investment patterns. 

5. Gifting your loved ones - Every body likes to get pampered & to gift your loved ones is good way to show love and support, however, choosing a gift for your spouse, child, family is also an art. Gifting a  Rs 5000/- Gold earring is asset where as gifting Rs 5000 Burberry perfume is a liability. The Gold can always glitter but the perfume cant. :-) 

6. Learn to give money - Try to give some part of money from your profits to the needy, giving away money to people or organisation who are using it in teaching or schooling is best way to give back to society, always do that. Sometimes money cant help you, but blessings can, just like the richest of people have lost lives due to carona virus, even their money could not save them. 

Spread learning and educate people around you, every day you learn something if you keep your mind open for it.  

Work to learn & not for money. Money will find its way if you learn to make it work for you. 

Lastly, there is a quote by Robert Kiosaki, in his famous book, "Rich Dad, Poor Dad" 

RICH PEOPLE DO NOT WORK FOR MONEY, MONEY WORK FOR THEM. 

Make your money work for you, 24 x 7, every day with every penny you earn, you decide to be rich, poor or middle class. If you have likes reading this, please teach your children the money management & not how to become a good employee. 

You can also invest some of your free time in reading below books - 

1. Rich Dad Poor Dad

2. An Intelligent Investor 

3. One up on Wall Street 

4. Men Of Steel 

Disclaimer : The above views are my personal views & opinion, people may have different and better ways to manage their wealth. I am just a writer & not a wealth advisor & above examples are only for educational purpose and not investment ideas. Please invest wisely doing your own research.