I strongly believe, financial literacy is best promoted by non-professionals. Kirti Desai who runs Bemoneyaware typifies this belief. Pleasantly surprised to learn so does Silki Gargh, a telecom professional from Varanasi, who runs loancalculators.She reviews loan products, creates calculators like SBI Maxgain Home Loan Calculator and writes on technology, computer security, online threats and virus attacks.The website is her attempt to explore, learn and share. This post is written by her.
He never said it! Said what?
- “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”
- “The most powerful force in the universe is compound interest”
- "Compounding is mankind's greatest invention because it allows for the reliable, systematic accumulation of wealth."
Einstein's discoveries influence every (believe me, every) conceivable aspect of human existence. He however never said anything about compounding. There is no record of it. These are yarns spun by financial gurus to catch peoples attention. To lend credibility to their claims. Over time these claims have compounded to different forms! Do you need a genius to sell commonsense? Unfortunately yes!
Financial advisory can be divided into components. One which is generic advice, the kind available at the cost of only electricity and internet usage charges in blogs, forums and elsewhere. Then there is personal advice which can be obtained for a fee from a planner or free from your LIC agent uncle. Unfortunately most confuse one component with the other, but let’s not open that Pandora’s Box today. Personal advice is personal and not much can be written about that. Generic advice on the other hand, is and must be (in my unimportant opinion) grounded in mathematics. That is the principles must be supported by consistent mathematics. All very well, what has this got to do with the post’s title?
I had earlier written about Bemoneyaware: A Unique Personal Finance Blog authored by Kirti S Desai. The blog is part of the main Bemoneyaware site. The site was originally started with the intention of promoting money awareness among children. Everyone will agree that educating a child about money early in life is an important parental responsibility. Yet the only thing most school children know about money is in terms of products: expensive, affordable and cheap .. for their parents that is! The biggest challenge in teaching children about money is that they don't want to learn it (among other things of course!). They think it is boring adult stuff which can wait until they become adults (little do they know that after you become an adult all you want is to be a child!). So you can't tell them, 'you need to know this'. The learning has to be fun and exciting. As an educator I know just how tough this can be!
Worried that you will never be able to invest enough for retirement? Do the results of a retirement calculator scare you? Learning about the 'bucket strategy' might help cope with these issues.
How much do I need to retire? Most people (among those who bother to ask!) are troubled by the answer to this question. The corpus required and therefore the monthly investment required seems so high that some think inflation is an urban myth! A middle-aged person who has not paid attention to retirement earlier is likely to end up with a much lower corpus than required. How does one cope with such grim realities?