I am an investment planner. Towards the end of a successful meeting with an extremely wealthy client, he said to me – “This sounds like a great plan. Let’s start once I discuss this with my Dad”
For many of us, our parents have played a profound role in shaping our financial mannerisms. Right from childhood through adulthood, we always count on our parents for a second opinion on financial advice. No matter how financially savvy one is, he would always love to get a second opinion from his Dad; and why not? He’s already been through the game and has emerged successful.
With Father’s Day around the corner and remnants of the meeting lingering in my head, I started thinking about those timeless pieces of financial advice my Dad shared when I was young and naive.
I remembered the three incidents that shaped my financial habits and defined my current financial success.
Episode 1: Living within your means
I was ten years old and on the next day, the school had organized a mini-carnival where all the students were supposed to pay to play different games and could buy candies from different stalls.
I went to my Dad asking him for some candy money – probably around Rs.30. To my surprise he handed me a Rs.50 note and told, “This is your money. But, be careful. This is all you have for this month and you have a school picnic coming up as well.”
“What!?” I yelled as I asked, “How am I to enjoy the carnival and the picnic with only Rs.50?”.
He replied with a smile, “Your life is going to be full of picnics and carnivals, but sometimes, life does not give you enough to enjoy both. You should find a way to happiness with whatever you have.”
I was just ten years old and I had learnt a priceless secret to happiness – living within one’s means. I had started living frugal and most of my money would land up in my piggy bank.
Episode 2: You build your future, so plan accordingly
I was 13 and immensely fascinated by my 17-year-old cousin’s swanky Honda Activa.
One day, I asked Dad about when would I get one? The response, as always, amused me. “As soon as you get your driver’s license and buy one.”, he said. I wasn’t completely shocked but this buy-your-own-scooty seemed a little too much for me to absorb. After all, it costed quite a bomb for someone earning nothing but the Rs. 600 saved every month by walking to the school and back instead of taking the auto-rickshaw.
Dad knew I was saving up since quite some time now and suggested that he had an idea that would bring me closer to my dream scooty. I remember insisting that there is no way I’d be able to do that to which he asked, “What if I say that your money could grow by itself, without sweating it out?”. “Just like a plant?” I countered. “Just like that”, Dad said with his usual grin.
This was when he introduced me to the Disneyland of money – the bank. I got myself a savings account and was told that if I would regularly put my money into a fixed deposit, it would grow by itself. The bank guy assured me that they would take good care of my money and ensure that it grows well.
Fast forward 4 years, on my seventeenth birthday, I used the Rs.38,383.33 to buy the scooty I adored. Obviously, Dad added around Rs.10,000 but he said I had earned it. The feeling was priceless.
That day, I realized that all goals are achievable through proper planning.
Episode 3: Disciplined investing and power of compounding makes life easier
I was 21 and had just graduated from college and was offered a campus placement with a well-reputed company. My parents were very happy to see me cross an important milestone. Everything was going great till I realized that Rs.25,000 per month is not something that would make me a millionaire.
Dad, as always, sensed my predicament and spoke softly, “It is not about how much you earn, but how well does your earning grow.”
Times had changed. Fixed deposits were no longer magical. In fact, the returns would even lose out to inflation. This is when my Dad flipped out his phone and showed me an app – it was an investment app and he had invested into mutual funds. I had read about mutual funds but never knew that Dad invested through them. However, my thoughts were interrupted by the amount I saw on the screen. The screen showed an investment corpus of close to Rs.13.7 lakh and an SIP of Rs.10,000 active since 7 years!
“What!?” I asked in a surprised tone, “How is this even possible? I can invest double the amount! Can I also build such wealth?”. As always, Dad smiled. I had just learnt about the eighth wonder of the world – COMPOUNDING!
Today, I’m not a millionaire yet, but I can definitely see myself becoming one in a few years’ time.
Thank you, Dad.
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