Note: This article is equally important for students and parents alike. So students must also share it with their parents. Post your questions and comments below.
Students must take every opportunity to learn FINANCE. This may be the most important advice you get in life at this juncture. Now, Finance is a very wide field of study and reading books on Finance is not what I am talking about. If we don't read books on Finance, then how are we supposed to learn it? Well there are a lot of ways to do that and I will give you some ways but before that let's just understand quickly what is Finance and why is it useful for us at all?
1. WHAT IS FINANCE?
Finance is simply the management of money and includes activities like - lending & borrowing | saving & investing | budgeting & forecasting | spending & earning
2. WHY IS FINANCE IMPORTANT?
Financial literacy is vital because it allows you to get things done. In a hypothetical scenario, if all of you were to start your life only with one Rs 2000 note, those who will be -
1. literate will make money work for them and turn it into wealth
2. illiterate will work to find money and still not create wealth
Unfortunately, most of us realise it very very...very late in life.
The reason behind all this is a concept which you must understand - Compounding.
3. HOW DO I LEARN FINANCE?
Before I go further, you must remember this always even if you dont understand it today -
Four Golden Rules -
1. Your salary will never decide if you are going to be wealthy
2. Wealth is measured by assets & liabilities, NOT by bank balance
3. Aim of financial literacy is to build assets, reduce liabilities
4. Luxuries tend to become necessities and spawn new obligations
To understand what are assets and liabilities, you can click and watch this video.
Learning finance requires you to practice it. Here are a few easy things you and your parents can use in order for you to learn it early in life unlike your previous generation and they are completely free of cost -
Open a Savings Bank Account and start saving money from your pocket money as early as possible in life.
Make a strong habit of tracking your or your family expenses. Yes even the small ones. You can use Splitwise app to make it easier.
You must read news in finance section as much as you can understand everyday before having breakfast. You can either read in newspaper of subscribe on an app.
Every time you spend money on something - think if it's an asset or a liability? This will train your mind to think logically and think fast.
Try to understand and remember the "Four Golden Rules" above. Each one of them is important to you and earlier you realise, the better.
Feel free to ask questions in comments and I will try to answer as much as possible. Also please like, comment and share the blog with your friends. Thank you and good luck!
PS - Only for avid Readers - I recommended reading a book called "Rich Dad, Poor Dad" by Robert Kiyosaki. It is simple, story telling style of writing and gives important lessons which students can also benefit from. For those who can't survive reading should learn to read but here is a short video summary-
PPS: This is a series of blog posts every weekend - Saturday and Sunday - for my students to learn and benefit from. A way for us to remain connected beyond school and tuition classes. I welcome suggestions from my students about the topics they would like me to research and write about. If your suggestion is selected, I will mention your name in credits of the blog. Please like, share and subscribe to the blog for more grown-up advice. Stay safe and stay connected always :).