There is little in college education that can prepare you for the intricacies and the realities of managing your money. Before college students go out to get a job and earn their first salary, it is important for them to have a good understanding of what it takes to protect their money and invest smartly in a manner that would deliver prosperity in the long term.
Moneylife Foundation conducted a special programme for students –“Be Safe and Smart with Your Money” at Vaze College, Mumbai. The first session was conducted by Sucheta Dalal, managing editor of Moneylife and founder trustee of Moneylife Foundation. She pointed out to the students as to how one can avoid financial mistakes. The second session was addressed by Debashis Basu, editor and founder trustee of Moneylife Foundation. He articulated the simple steps for investing smartly.
Ms Dalal started her session with a brief introduction about scams in India. A person’s knowledge or smartness does not guarantee that he/she cannot fall prey to the confidence tricksters. She narrated to the packed audience incidents, where “relationship managers” have taken genuine and educated customers for a ride. She also explained how usurious are the rates charged on credit card outstanding. Ms Dalal talked at length about the new phenomena like Phishing and Vishing on the internet that traps the gullible public and robs them of their hard-earned money.
There are different types of scams – lottery scam, job scam, conference scam and interest waiver scam out to get us. The numbers of scams reported are infinite. In her session, she also discussed that one should keep one’s financial life simple and one should invest in just a few products—products that are safe and well regulated. Ms Dalal spoke about the dubious schemes like QNET, Pearls, City Limouzine, Japan Life, which could be clubbed to category called Pyramid scheme or chain money schemes. These schemes claim to provide extremely high returns luring the unsuspecting savers and then vanish into thin air.
In the second session Mr Basu explained the importance of saving regularly to secure one’s future financially. Everybody can make financial decisions, he said if they stick to some simple principles. He explained the principles of compounding under different scenarios. The effect of compounding is slow in the initial periods, but as time passes on, the power of compounding takes over and the wealth created is huge. The key rule is to save as much as possible as early as possible in good financial products.
He illustrated several situations to explain this concept. When investing over a 20-year horizon, even if one starts five years or 10 years later and invests a higher amount, they will end up with a lower amount at the end of the 20-year period, than a person starting at the beginning of 20 years.
Many students look to earn a good income when they start work. Mr Basu highlighted that savings has nothing to do with income. It is more important to spend smartly.
Where does on invest? Mr Basu explained to keep it simple. While not going in to detail on the various investment products available, he gave the suggestion of just one. As college student have time on their side, he advised them to invest in equity mutual funds and stocks with an investment horizon of 15 years or more.
The event was concluded with an interactive question and answer session.