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Parents are best teachers

Even before you start earning, learn the art of saving from parents

Steven Fernandes 

Rajesh Iyer, 37, has fond memories of his childhood when his father was the only earning member in his family of six. His mother was a homemaker. Iyer still does not know how much his father would earn but he vividly remembers that the first thing he used to do on getting his salary. Iyer's father would give a part of his salary to Iyer's mother and the rest was deposited in his father's bank account. Iyer's mother was supposed to run the house from that money.

A couple of times, Iyer used to accompany his father to the bank only to stand in the serpentine queue to deposit the money. At that time, Iyer could hardly understand the reason behind depositing in the bank. Even though the bank was nearly 2 kilometers away from their house, Iyer's father preferred walking.

Despite being the only bread winner, Iyer's father provided good education to all his four children, all of whom are well placed today. Even today his father takes care of his daily expenses and medical bills from his own sources which have been invested diligently in fixed income instruments. Now, Iyer often hears his father say how he saved Rs 10 on a particular day by boarding the bus from stops ahead. That only keeps him fit but also saves money. (Click for table)

Today one may argue that during our parents' era circumstances were different. And certain money traits of our parents are not relevant in today's world. For example, things which were luxuries earlier have become necessities and mobile phone are the biggest example. Today, time is of the essence and everything has to be acquired pretty fast otherwise we may suffer, sometimes even from inferiority complex due to peer / societal pressure. But on taking a closer look, we come across some traits or habits of our parents which are still relevant in today's world when it comes to saving money.

Here are a few: Saving for rainy day

Even without any formal insurance arrangements that time, in many cases, most working parents thought that it was necessary to save some money regularly which could be utilised for any requirements or emergency in the family. Unlike today, there weren't a plethora of products available that time. The humble bank and postal deposits fulfilled the requirement of safe investing and guaranteed returns. These are simple products which can be understood by the everyone.

Today despite much better income levels, most individuals are lazy to save, forget investing. Some are not even able to save as high lifestyle expenses ensure that they end up splurging more than they earn. Today we are spoilt for choice to invest in too many products and asset classes, but end up keeping our money idle in savings account due to lack of time to invest. If we use proper asset allocation and good products, we can create a huge corpus for future needs.

A penny saved is a penny earned
Most mothers don't buy anything unless they see a bargain or unless the seller reduces the price. Today due to paucity of time, we end up paying an inflated price to avoid any arguments and waste of time. Secondly eating out on several times even without any occasion has become the norm with most people. We even end up buying more than we need at times just because there was a sale on or products were available at a discount. Best is, when many go to buy A and end up buying many other things but A. These habits were a strict no for our parents and they still maintain it. Like our parents, we can avoid or begin cutting down on unnecessary expenses which in turn can boost our savings.

Stay away from credit
Most people would vouch for the fact that their parents never dared to take a loan to buy a house or any utility item as they believed that it would only be right to earn, save and then buy. Sometimes debt is good especially when we want to buy a property which we will need for self occupation, but not at the cost of taking a very big loan where you end up paying a major amount of your monthly income. Make sure that credit taken for purposes like purchase of a house is not wrong but first save so that you can take as little loan as possible. Also, do not let the monthly outgo towards the loan exceed 40 per cent of your income. Avoid multiple loans as too many loans can also push you into the debt trap. Importantly, many take loan to go on holiday or to pay off another loan. This should be curbed. Our parents did not believe in instant gratification and therefore, they steered clear of credit troubles.

Create support system
Our parents, most of who lived in the joint family, ensured that the entire family lived and shared their good and bad times together. Today with nuclear family system being prevalent and our very busy work schedules, the social touch and our relations have taken a severe beating. We live in times when there is too much of economic uncertainty. In such difficult times, only your near and dear ones can be a good financial and emotional support. Even during medical emergencies, those close to you can provide great support only if you have been able to maintain good relations.

It is important to hone your child's financial habits from a young age. And given children today are more observant than their parents, you should keep a check on your money habits that can influence your child. Hence exhibit good financial habits like your parents did to teach your child the best.

The write is chief planner, Proficient Financial Planners

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First Published: Sat, March 23 2013. 21:50 IST