Money Matters

Physics, History, English…. We learn them in school. Why don’t we learn finance? Of course, we did from our parents and grandparents. As one grows from a dependent to independent to having-dependents, managing finance is such a key aspect that makes a significant difference in life. Managing finance isn’t just about making the ends meet – pay bills, pay loans, reduce tax (call it the march-tax-save-rush). Managing finance in this day, must include “generating passive income”. Aptly described in Rich Dad, Poor Dad as “Just as one works for money, ought to make money work for you too“. Today’s BusinessLine carries an article titled “Savings are not equal to investments: Need for financial literacy“. It is a must-read.

Finance consulting services in India is in a pathetic state of affairs-

  • Record collections to mutual fund NFOs (MF agents encourage investors to churn portfolios since frequent activity earn commissions)
  • Non-popularity of index/exchange traded funds (these products carry the least expense ratio but not earners for agents)
  • Extreme popularity of unit-linked insurance policies (term insurances makes most sense to genuinely protect one against risks. Term insurance premiums are 1/20th of money-back insurance policies)

Though dedicated efforts are being made by government agencies to improve, there is long way to go. In the meanwhile, “savers” need to quickly graduate to “investors” i.e financially literate. There is no choice.

By the way, State Bank of India reduced interest on deposit rates. If you did not know this, ……………….. (you know what I mean!)

Update: From Outlook Money’s Small Talk, Big MattersHarish Rao conducts summer camps in Bangalore for 10-14 year age group on money management. A bit of looking around and discovered Harish Rao’s blog – Simple Equation & a podcast.