Investment Objectives & Advice

5 Lessons from childhood: Financial Health

My Father was a very successful person, may not be financially wealthy or rich but self-sufficient and able to meet all his commitments. I was always amazed that whenever we were in dire need of anything he was able to get it with a magic. When I started  understand things, I started questioning him but in our family, father is a serious person at home and not a friend. You need to be afraid of him as well as respect him (which means obey him). He never answered directly to my questions but knowingly/unknowingly he taught me the lesson which made me understand the trick behind the magical fulfillment of our wishes.

I was in 6th grade, 10yrs old kid. By god’s grace I was able to perform well in school and college in terms of grades better than what my family history had been. My father use to buy me a gift based on my school performance, a reason for me being competitive, the gift use to be in range of 300-500 INR. But that year to my surprise he said no to the gift and asked me to buy it myself, though he said he will not pay me money in one shot. I was quite angry as I worked hard the whole year to get good grades in my school and the only thing I wanted was my gift, the handheld video game which was a sensation at that point in time.

This was my first lesson, anything offered to you is not your right and it is just an offer against one of the parameters you need to fulfill. Though I could not show my anger towards my father’s decision and had to accept his offer. He started paying me INR 60 each month as pocket money for a year and it will be extended if I continue to perform in school. Now suddenly I had a cash in hand and INR 60 was probably a big amount 20yrs back when sweets used to cost 20 INR/Kg or my favorite chaats use to cost mere INR 1 at max. I was very happy enjoying that money in hand and spent it on all my favorite shops about chaat/sweets/gaming centers etc. After 4 months my father, just asked me if I bought my handheld video game as in total he had already paid me INR 240 and game cost around INR 200 at that time. To my surprise I never realized it and to my wonder I only had few tenners in my pocket. In the immediate gratification I completely forgot about the handheld game which I wanted to buy.

Second lesson, having a plan is the key to success. He told me that he can start paying only 50% of my pocket money and keep the other 50% safe with himself and after 6 months he will pay in lump sum to help me buy the Video game. To my surprise I was still happy while spending those 30 INR in hand as I got to eat all those junk items at lesser frequency though, alongside saving for my video game. Till now I never looked at that option. As the year was passing I was happy to be able to buy that video game as well as enjoy my junk food eating habits. I never thought of the next challenge waiting around the corner, as the year passed and I succeeded in my school again. This time my wish was to have a good cricket bat.

Third lesson, self-discipline is harder to achieve than preached. My dad as promised extended my monthly pocket money this time he didn’t offer to cut and save on my behalf to fulfill my wish to buy the cricket bat. Now I knew the way, so I decided to do it myself. When I got the money I thought I will save 50% of the amount and spend only half but in reality I was on spending spree thinking that I will save it tomorrow and that tomorrow never came. I failed for 2 consecutive months and unrest in myself grew day by day so I started thinking the way to change my behavior. I stopped eating junk on alternate days but when I had it, I gave up to the temptation and ended up spending more. The process helped me saving some but was way less than the target amount.

Fourth Lesson, first save then spend it is just an easy way to trick your mind. One day to my surprise, my mom gifted me the piggy-bank with key where I had to convince my mom  to withdraw from my piggy-bank. All of a sudden it was so simple that at start of each month I will put 50% of my pocket money in piggy bank so that it will not be spent by me and I myself will curb the temptation as that is the amount I earmarked for a goal. Now my mind was treating that money differently. Every time when I had a temptation, my mind will tell that my goal is more desirable than the junk food I want to eat for immediate gratification. I was surprised with myself as I was able to buy my cricket bat as well as save some more for my next purchase.

Fifth lesson, what we want is not necessarily what we need is. With each successful academic year my pocket money continued and I now learned the art of saving and spending on specific things instead of spending randomly. I learned the lesson of disciplined spending. Thought I got another observation that the video game I bought after so much effort was dear to me only for few months. And Cricket bat was used only few times and can still be sold back as new. This triggered the second thought in my head about the thing next I buy next, now I started gauging the importance of things to me before I buy as well as the charm of seeing good reserve of cash in my Piggy-bank at my disposal to get what I want. I let the temptation pass to buy a (TV attached) video game, then I let pass the temptation to buy an air-gun and then many more temptations. By now, I realized that having money at disposal is the best expenditure as you can en-cash on it when you need it. I got the key of my piggy-bank from my mom because by now I knew when to en-cash on it.

During the last 20yrs I still have the charm for cash in hand (though I also gained the wisdom of not just keeping the cash idle). I still feel the same about my expenditures and save before I start spending. The magical mystery that my father never told me but passed it on to me with this simple exercise has been a tremendous help for me. Let me summarize the lessons of my childhood, which will help you in being financially healthy in long term.

  1. Don’t take things for granted
  2. Always have a plan
  3. Learn the art of Self Discipline
  4. Save before you spend
  5. Separate the wants from your needs

Let me know if you agree from these lessons. Any comments and suggestions are welcome and stay tuned for more lessons and stories in the upcoming weeks.

2 thoughts on “5 Lessons from childhood: Financial Health”

  1. But wat if the earnings are less n the basic needs are more? How can one save then? COz in times like these one needs to have savings… but the salaries are not increase exponentially the way expenses are!

  2. Earnings less than the basic needs is a sign of lifestyle disease which basically indicates that person has got into the habit of receiving outpatient care. It means person lives above his/her means due to economic support from parents/siblings/spouses or friends. (Read The Millionaire Next door for more details). To overcome this you need to be patient and determined, Start with writing down your each cent you spent in a month and post that review how much is discretionary e.g. movies/dinner/travel etc. Try to look for alternate to trim down the expenses by 10-15% in next month. In a quarter you will gain understanding of your budget and related expenses. That will be a good first step.

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