Financial Saving – We Must Start Early!

Today, when everyone is sitting locked up in their homes, those words of wisdom from grandmothers ring true louder than ever. Wash your hands, they said. Eat nutritious food, they said. Be kind to the neighbors, they said.

When we look back, our grandmother’s wisdom was solid advice for a bright and healthy future. Now, a virus has forced us to follow them. But, one advice that we forget at our own peril is ‘Save money for the rainy day’.

This topic has been on my mind for a while now. As a financial advisor, I see so many people coming to me after they start a job (and moved a little higher in rank and in age) to start saving money. But why so late? Let me elaborate, why it’s late with an example – on a simple 7% compounded rate of interest if one begins saving for their children at age 0-5 they would have a corpus six times more (!) and this will be only 2 times more wealth if they start investing post-schooling and only double if they wait till late 20 twenties to start investing (refer to the graph). A lost opportunity for you and your money six times over!

Internationally “0-3 years” bracket has become the age to start investing for your kids. Maybe it’s a habit that Indian parents need to develop more than Indian kids! When economies are shrinking beyond recognition, unemployment numbers are touching the skies and inflation is imminent, those who did not heed such an advice are doomed. For many amongst us, saving money for the next day is not an option. They earn, they eat. But for others, it is an option. And it is time we inculcate such habits in children from their formative years. 

Unlike the consumerist economy of the US, Indian economy which relied on savings fared a lot better even in tougher times such as the global recession of 2008. So, just as kids learn how to swim or ride a bike, they should also be taught to fill out that Fixed Deposit form in their pre-teens. They will thank you for it!

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