Skip to main content

Financial literacy among young people

THERE is a growing interest for financial literacy among young adults. In the last six months, I have had young graduates — most of whom who have taken up jobs to acquire work experience so that they can pursue a masters' degree later — asking me about financial planning. Also, there has been enthusiastic response from young BPO employees to workshops on managing money, organised mostly by their employers. Many think managing money is about learning the concepts, terminology and processes. Developing the right attitude towards money is perhaps precious at a young age, when people begin to deal with money they can call their own.

First, making decisions about money requires making sensible choices. It is about considering alternatives before deciding. Youngsters struggle with choices anyway — from the clothes they wear to the friends they make. They tend to be swayed by a number of external factors — peer pressure, fads and coolness quotient. Money choices need not mean stark rationality, but definitely require taking the time to make up one's mind, especially after considering one's specific situation. The ability to distance oneself and make a considered decision is a trait to be developed over time. Many grownups are unable to hold back the impulse when it comes to spending. It is important to hone the skill to not act in haste, but think through a decision. Keeping away from discount sales, last day offers, special prices, freebies and the likes is a good starting point. A good decision with money is made without being pushed into something in haste. Given the time, a good decision persists on merit and what could have been a bad impulsive decision fades off.

Second, given that money is a limited resource, allocation towards various needs is a tough challenge. All of us have memories of spending away our salaries too soon, and the painful wait for the next pay day. Making a budget may be an extreme case, but taking the time to make a mental allocation to key items that need money, and completing them first, is a good habit to develop. Without prioritisation, wasteful expenses take away most of the income, leaving too little for essentials. Borrowing from friends may not always be a palatable or available option.

Using the credit card only means spending the future income today. A mental allocation to various important needs and the ability to prioritize is another skill to develop. Using internet and mobile banking to set up auto debits for key payments, and ensuring these are completed before the money is available for other uses, is a good habit. It may be tiring to consider the money angle every time a spend presents itself, but mental budgets tend to bring about discipline over time and a control on ones finances.

Third, saving for the future is not something that crosses the mind of young first-time earners. There is a high level of confidence about the future and a fear of the unknown, is well, unknown. It is even seen as extremely conservative to set money aside. To save is to pay ourselves, from what we earn. But, it takes a while to develop that attitude. A good beginning point would be the ability to overcome the need for instant gratification. The emotional quotient needs to get better, so every need does not look like an immediate necessity to be fulfilled without delay. Living in a consumption age where spending is the new fad, this may be tough. But, the ability to postpone a desire is what would develop into the ability to save. Savings provides a much greater flexibility with money and enhances the choices one has in using money.

It would take a while to develop the right attitude to money, since much of it is shaped by one's upbringing and specific circumstances. But, it may be worthwhile to consider the independence that earning money brings in and to hone one's skills with money.

Popular posts from this blog

Franklin India High Growth Companies Fund

Franklin India High Growth Companies Fund Online One of the key developments that the Street is keenly waiting for is a cut in interest rates by Reserve Bank of India . With demand rising gradually, a rate cut is expected to boost earnings growth for companies. In such a situation, schemes which invest in high growth companies are best suited, especially when seen from a long-term perspective. One such scheme is Franklin India High Growth Companies Fund. Fund managers Anand Radhakrishnan, Roshi Jain and Srikesh Nair strictly follow valuation parameters when it comes to choosing stocks.Valuation parameters, such as enterprise value, price-to-earnings growth ratio, forward price-to-sales ratio and discounted earnings per share, play a critical role in selecting companies for investments. Taking into account these parameters, the fund managers invest in companies which are poised for high growth in their respective sectors. This approach has been in favour of the scheme and it has perform...

Debt Mutual Fund Dividends are Taxable

DDT is deducted when a non-equity fund declares dividends. Equity and balanced fund dividends are tax-free The AMC is correct to deduct the dividend distribution tax (DDT) as it is mandated by tax laws. DDT in mutual funds is deducted every time a non-equity fund declares dividends. Equity fund and balanced fund dividends are tax-free . It is possible that you have invested in a non-equity fund for the first time or have received the dividend under a non-equity fund for the first time. That is why this is the first occasion when you have come across DDT.   The rate at which non-equity schemes deduct DDT has also gone up after the July 2014 budget. This is due to a change in calculation methodology. Earlier, if the fund has to declare a dividend of R 100, it used to make a provision for R 128.3, paying R 28.3 to the taxman and distributing the balance to the investor. This allowed the investor to bear less tax since the effective tax rate was 22.07 per ce...

Atal Pension Yojana contribution Tax Benefit for spouse

Contributions to Atal Pension Yojana (APY) are eligible for the same tax benefits as the NPS. This means that the contributions can be claimed under Section 80CCD (1B). The current limit for Section 80CCD (1B) is   Rs   50,000, over and above the   Rs   1.5 lakh limit under Section 80C. Section 80 CCD (1) is a different one, meant to cover employers' contribution towards NPS . You cannot get tax benefit by investing in the name of your spouse under Section 80 CCD . ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in India for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. ...

Avoid NFOs

  Don't get taken in by the flurry of new fund offers. You will be better off sticking to the tried and tested schemes.   For the past one year, to cash in on the bull run in equities, mutual fund houses have gone on a new fund offer (NFO) overdrive. But experts are unanimous in their advice: avoid NFOs . While past performance is not an indicator of how a fund will fare in the future, it does tell the investor how skilful the fund manager is. This crucial information is missing in an NFO. Not only is there no track record to judge an NFO by, many NFOs are similar to funds that already exist. If the new fund is similar to existing funds, you are better off investing in the latter. Around 67% of the new launches in 2014 were closed-end products. Investing in the NFO of a closed-end fund is doubly risky. In case the fund's performance is lacklustre, a closed-end fund does not allow you to exit. Even though closed-end funds are listed on the stock...

Mutual Fund Exit Load Changes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Mutual Fund Exit Load Changes AMCs don't communicate about any change in exit load directly with investors, but do update on their website   The exit load applicable to your investments is the load which existed at the time when you invested in the particular fund. Any subsequent changes in the exit load will not be applicable to your investments.   However, Asset Management Companies ( AMCs ) periodically publish addendums in the newspapers, which state any change in exit loads of specific schemes managed by them. Such changes are also posted on their websites. However, a direct communication to an investor is not made, considering the costs involved in doing so. In their own interests, investors should not only track the performance of the funds they i...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now