Teaching Kids about Money and Finance

Kids are innocent and they learn very fast. If we make them understand about money and finance in their childhood and teach them about good money habits, they will do well as they grow and will have inherent good money habits. This will help them in their future life. Let’s understand how to teach them about money and finance.

1. Piggy Banks: By gifting them a piggy bank we can make them learn about importance of savings. They can buy toys or other things by first saving and then spending.

2. Games: there are various games like Monopoly, Game of Life, Vypaar etc, which we can play and make them understand how money works and how transactions take place.

3. Open An Account: We should open a saving account in our child’s name and let them deposit money in the account and understand about interest and how money grows and also other investment product.

4. Budgeting: Involve your kids in home budgeting exercise, so as to make them understand about income and expenses, essential and non-essential expenses etc.

5. Shopping: Take your kids for shopping. This will make them understand about bargaining, quality, and prices of the products. We can further explain them about wants, needs, comforts, and luxuries and how to maintain fair balance between them.

6. Discounts & Offers: When we are shopping online or offline we can explain them about various deals available at particular time and how to save money by using discounts/deals and offers.

7. Rewarding: We should reward our children to encourage them to save and also when they contribute (by controlling their expenses) in home budgets.

8. Inflation: We need to educate our grownup Childs about impact of inflation, purchasing power of Money and various investment products.

9. Contingencies: Telling them about various scenarios of life and how various situation requires money will help them to understand about uncertainties in life and how to tackle them.

10. Practice then Preach: What we teach them should also practice ourselves as practising the things makes much deeper impact then just teaching.

Small but good money habits can make a significant difference in the future life of a child, so teaching them in their starting will help them to get in there unconscious mind and use it when they need to take decisions about money in future.

This Diwali Let’s do something different

Diwali is the festival of lights. We remember Diwali for the gifts, sweets, crackers, new clothes etc.

The five-day Diwali celebrations involves illuminating the household with decorative diyas (oil lamps) or candles, hanging up handmade kandils (lanterns), streamers of fairy lights, grand display of fireworks and crackers to signify the elimination of darkness and movement towards light; hope over despair; good over evil; and knowledge over ignorance.

Many of us look forward to a Diwali bonus normally given by companies besides a salary. This bonus helps in dealing with additional expenses like buying gifts and cooking feasts for loved ones, festive purchases, and meeting your regular. Although as compared earlier times now people keep on buying things regularly however still Diwali has its own importance for purchasing new things. However we should not get into impulsive buying just because there is a offer.

So what should we do to our bonus/extra money this time?

This time let’s invest this money to illuminate our future financial well-being.

However, while investing, we should keep in mind certain essentials:

1. Think and Plan properly before investing

2. Know your own Risk Appetite based on age, goals, income dependents etc.

3. Have Clear Objective and time horizon for investments

4. Understand the Tax Implications

5. Have proper Asset Allocation

6. Invest regularly to get the power of compounding

7. Have Discipline in investments

8. Take an Expert’s Assistance, It actually makes a different.

We should also follow certain don’t while making investments which are

1. Don’t Speculate, It’s dangerous

2. Invest own money, don’t leverage for investing except real estate

3. Don’t use Emergency funds for other purpose they are for emergency only

4. Don’t be emotional with your investment if it is not working then get out of it

5. Review and adjust your portfolio on regular basis

By taking these basic steps and investing surplus money in a prudent way can help us to get our future goals more easily and comfortable.

So this Diwali let's not just spend but also save to celebrate many more Diwalis in future.

Wishing everyonee Happy and Wealthy Diwali

The golden savings tips while maintaining your current lifestyle

Generally when we talk about personal finance it is related to investing. However the biggest question comes how to invest, if we don’t have enough savings? Although regular savings habit is part of our ancient culture but in current environment, with rising cost of living, better lifestyle and with consumerism part of our culture,  Saving sufficient amount is becoming increasingly difficult and challenging. In this post, we will discuss some golden savings tips that can help us, without compromising in our lifestyle.

• ·        Make a monthly budget:

If we sincerely make a monthly budget half of our job is done regarding controlling the expenses. However we should be careful while making budget, it should not be a theoretical exercise but based on all practical needs and not on gut feelling. When we prepare your monthly budget, it should start with absolutely necessary items, e.g. food, rent, utility bills, transportation costs, children’s school fees, insurance premium, home loan EMIs etc. After that we should keep some money aside for emergency needs. The balance is discretionary spending. We should always try to minimize our discretionary expenses and maximize the savings. So how can we do that? First we should take out our monthly bank or credit card statement, and study our spending habits. We should check each and every items whether it is necessary or discretionary and eliminate wherever possible. The other option is to set a savings target and stick to it assiduously.

• ·        Debt only when desperate:

Loans means spending tomorrow’s income on today’s expenses so we should avoid debt and take it only for very essential things. Debt comes in many forms e.g. credit cards, buying expensive electronic gadgets/ items in equated monthly instalments etc. We should always remember that debt, in whatever form, have its cost in the form of interest expense. If we cannot control our buying habits than we should use debit card, instead of credit card. If we are using credit cards, we should ensure to pay the full amount due on a monthly basis. Setting up an ECS to pay the full amount due on credit card on a monthly basis before the due date, will prevent us from incurring interest expense and late payment fees. We should avoid EMI payment schemes for purchases the simple logic is if we cannot pay in full, probably we cannot afford to purchase the product as of now. So we should wait till we have saved enough to purchase it by paying the full amount or opt for a lesser priced product. We should not be enticed by promotions like “zero interest” EMIs for purchase of certain items. There is no such thing as a free lunch. For such items with zero interest EMIs, we are likely to get a discount if pay upfront which is similar to interest cost. If we already have debt, it should be paid in full, before we spend on non-essential items. However there are certain loans like Home loan which are not bad if taken to buy home for living as in that case we are buying assets and will also get income tax benefit.

• ·        Plan before buy:

In earlier days like our parents first prepare a shopping list, before going for grocery shopping. The shopping list has a great use, if we are trying to minimize our spending especially when we are shopping in a supermarket. With a shopping list we shop with a sense of purpose and only buy items that are really required. On the other hand if we are shopping without a list, we may end up buying unnecessary items that catches our fancy, rather than the utility. The ambience and product placements in supermarkets are designed to make us spend more and feel good about it. For example, the music in the supermarket often has a slow rhythm. The idea is to make us walk leisurely, so that our wandering eye can catch some attractively packaged stuff that most probably we do not need. Smart product placement often makes us spend more. Generally the most expensive brands are kept at the eye level and the less expensive brands are kept in the upper or lower shelves. Naturally the most expensive brands will first catch our attention and make us buy it. Many supermarkets have consumer durables next to fruits and vegetables. Although, it does not make logical sense but there is a science behind the product placement. The bright colours of fruits and vegetables serve to brighten up our mood. The happier we are, the more we are likely to spend on a consumer durable item that we may do not need. On the contrary If we have a shopping list, we will buy only those items that are required and leave.

• ·        Wait before buying:

When it comes to buying gadgets like TV, Laptops, smart phones, tablets etc very often we want to buy the latest model. But we should also remember that latest model is often the most expensive one too. First we should ask our self, do we really need the latest model. If we can afford to wait for few months, we may get the same model at significant discount. However, I do realize that it is easier said than done. When it comes to electronic gadgets, people are led by “herd mentality”. We should, however, remember that smart savers are never influenced by what their peer group is doing, because most people in the peer group are not smart savers.

• ·        Shop Smartly:

In the current age of internet and ecommerce online shopping could be a smart and time and money saving. Online shopping cheaper because real estate cost of brick and mortar stores are getting expensive by the day, especially in big cities. Online retailers buy their merchandise directly from the source, instead of going through intermediaries. Some online retailers are well funded by venture capitalists. They can afford to adopt predatory loss pricing to capture the target customer segment. Online retailing is picking up in India at an accelerated pace. However, some customers are worried about quality, reliability and customer service issues. Some shoppers like to touch and feel the product before buying. You can visit a brick and mortar store to get a closer feel of the product. But you can always order it online and save costs. We can follow some simple tips to make the online shopping safe and enjoyable experience.

o   We should shop in a trusted familiar and well known online sites. Searching for a product on Google may throw up very enticing offers, but we cannot be sure about the trustworthiness of many websites. On the other hand if you shop from well-known online sites likelihood of things going wrong is quite less.

o   Before purchasing we should always compare prices of the same item on different websites so as to get the best deal. Different online shopping sites run different promotions and there are chances that we can get a better deal if we explore multiple options

o   Shipping charges could be a hidden cost and we should check it before placing the order. Otherwise, we may be hit with a nasty surprise when at the time of final bill.

o   Always check for security of website for making online payment through credit card we can check it through SSL encryption which is depicted by the icon of a padlock on the address bar.

o   We should fill out only the mandatory personal information, when making an online purchase. There is no use in filling out non-essential personal information like date of birth, spouse’s names etc. which can actually be misused by cyber thieves.

o   We should always use strong passwords, with combinations of upper case and lower case, numbers and symbols.

o   When on the move, we can use mobile apps for online shopping through our mobile phone. This will ensure online shopping on mobile a more efficient experience.

• ·        Savings through liquid funds:

Generally most of us keep funds in our savings bank that we will not need in the next few weeks or even months. Liquid funds are an excellent destination to park those funds. Liquid funds are better alternative to savings bank. While having an emergency fund parked in savings bank is essential from a financial planning perspective, if we can wait for a day to withdraw the funds, liquid funds are an excellent alternative to savings bank account. While savings bank interest is usually around 4%, liquid funds provide almost double returns in the range of 7.5-8.5%. This extra income is very useful from a long term perspective, because we can re-invest it in high yielding assets like equities and earn higher returns over a long time horizon. While liquid funds are subject to market risks, the nature underlying instruments in a liquid fund ensures a very high degree of safety. Withdrawals from liquid funds are processed within 24 hours on business days. Some liquid funds offer cash withdrawal facilities with ATM cards.

• ·        Start investing Regularly & Systematically:

In hindi there is a saying “ bund bund se ghara bharta hai”. Saving regularly is the best and easiest way for long term wealth creation. If we opt for systematic investing on predetermined dates directly through our bank accounts, It forces us to save more, by leaving a smaller surplus in our bank for discretionary spending. After a careful analysis of our regular expenses, we should prepare our monthly budget as discussed earlier and set a savings target. Based on this savings target, we should start a monthly systematic investing plan and set up an ECS with our bank account at the start of every month. That way we will prioritize long term investment over discretionary spending. With a systematic investment plan over a long time horizon we will benefit from the power of compounding of our investment returns and create wealth. The table below shows a scenario analysis of the corpus built over various periods of time at different investment return rates, with a monthly SIP amount of 5000/-

How Different Color Affects Our Spending

Find out which colors are subconsciously associated with certain feelings, and how that affects how much we spend at the Shopping mall.

This week we would be celebrating HOLI, the festival of colors. Colors are very important in life or else the life will be like a Black & White TV of 80s. Colors impact all part of life and they have lot of psychological impact on human’s brain. Our various decisions are impacted based the colors. At the mall, we can spot nearly every shade of the rainbow on signs, labels, doors, shopping bags—you name it and its there. They are not just put for the hack of it but those colors have been strategically placed to influence our spending. Various studies shows that people subconsciously associate specific colors with specific social or cultural messages. Knowing this, retailers carefully select the colors they use in an effort to get us to loosen our purse strings. Let’s understand how different shades affect your purchasing habits.

Black

Black is associated with power, elegance, formality, death, evil, and mystery. Black is a mysterious color associated with fear and the unknown (black holes). It usually has a negative connotation (blacklist, black humor, 'black death'). However Black is also the signature color of sophistication or royalty (the black party-wear), it dominates high-end makeup packaging and can even make inexpensive blushes and lipsticks seem more upscale.

White

White is associated with light, goodness, innocence, purity, and virginity. It is considered to be the color of perfection. White means safety, purity, and cleanliness. As opposed to black, white usually has a positive connotation. In branding, white suggests simplicity and purity. (Seventy-five percent of top skin-care brands are packaged in white.) It also stands for modernity and honesty, which may be why Apple swears by it.

Red

Red is the color of fire and blood, so it is associated with energy, war, danger, strength, power, determination as well as passion, desire, and love. Red is a very emotionally intense color. It enhances human metabolism, increases respiration rate, and raises blood pressure. Although plenty of shops embrace this color (and still find financial success), market experts warn that, just like a stop sign, a red placard can make consumers hit the brakes. It serves as an alarm, triggering a more careful consideration of our outlays.

Pink

Pink, a delicate color that means sweet, nice, playful, cute, romantic, charming, feminine, and tenderness, is associated with bubble gum, flowers, babies, little girls, cotton candy, and sweetness. The color pink is the color of universal love of oneself and of others. This is the favorite color of ladies especially the young girls.  It has calming effects, according to research published in the Journal of Orthomolecular Psychiatry. Scientists found that seeing pink slows people’s endocrine systems and tranquilizes tense muscles. How that might influence your wallet: Feeling relaxed may make it less painful to part with cash.

Orange

It is associated with joy, sunshine, and the tropics. Orange represents enthusiasm, fascination, happiness, creativity, determination, attraction, success, encouragement, and stimulation. To the human eye, orange is a very hot color, so it gives the sensation of heat. Nevertheless, orange is not as aggressive as red. The color is associated with equality and affordability, which is why you’ll find it at stores offering good value, like Big bazaar etc.

Green

Green, the color of life, renewal, nature, and energy, is associated with meanings of growth, harmony, freshness, safety, fertility, and environment. Green is also traditionally associated with money, finances, banking, ambition, greed, jealousy, and wall-street. This is the color of people who have eco-friendly and environment preservation in mind. Shoppers keep this color to impress eco-minded clients. However please keep this in mind that: Just because an item is green doesn’t mean that it’s environmentally friendly.

Blue

Almost everyone (especially men) likes blue. Blue is the color of the sky and sea. It is often associated with depth and stability. It symbolizes trust, loyalty, wisdom, confidence, intelligence, faith, truth, and heaven. Blue is considered beneficial to the mind and body. It slows human metabolism and produces a calming effect. No wonder it signifies trust and dependability and is a favorite logo color for financial institutions to assure its customers for safety. Blue also improves customer loyalty: Patrons are more likely to return to stores with blue color schemes than to those with orange color schemes, according to a 2003 study published in the Journal of Business Research.
 

Burgundy

Burgundy is a deep shade of red. It is named after Burgundy wine. This wine is named after the Burgundy region of France. This color reminds us of all things rich and refined (just like red wine), so don’t be surprised if a dress in this color costs more than a white one in a similar style. Its prismatic cousin, brown, has similar connotations of luxury.
 

Violet

Purple combines the calm stability of blue and the fierce energy of red. The color purple is often associated with royalty, nobility, luxury, power, and ambition. Purple also represents meanings of wealth, extravagance, creativity, wisdom, dignity, grandeur, devotion, peace, pride, mystery, independence, and magic. Purple reigns in the beauty industry, especially in the category of anti-aging products. When people see it, they think of royalty. Consequently, a purple box may help persuade us that the product has special properties and is worth a princely sum.

Yellow

It's associated with joy, happiness, intellect, and energy. Yellow produces a warming effect, arouses cheerfulness, stimulates mental activity, and generates muscle energy. Yellow is often associated with food. Bright, pure yellow is an attention getter, which is the reason taxicabs are painted this color. A mainstay at fast-food restaurants, yellow evokes energy and increases appetite, perhaps explaining why your stomach may start to growl when you pass those golden arches.