Thursday, 19 April 2012

9 effective financial education tips for children

Let this blog find you taking full ownership of your finances!

In our generation (people born around 1970s)! there was generally limited supply of money & information. These days there is an overload. What is available to kids is totally different order. We had limited or no home delivery options, limited housekeeping support. So as kids we many times were asked to go buy some groceries, milk etc, come back & return the balance. I notice that this is quite absent in current times of mall shopping, home delivery etc. This deprives the kids an experience of knowing “aatey daal ka bhav” (what things really cost?). When we ask teenagers in our workshop, on what they think is the cost of their lifestyle, they rarely have any idea. Their guesses are way off the mark. They also have very little idea of how their household is financed.

In our search for some effective ways to educate children on finance at an early age, we came across a useful article on I am reproducing the entire article here for your benefit.  You can click on the title to go to the article on their blog.

Do you want your children to be smart when it comes to Finance? Don’t you want them to learn all the things, which you’re learning today, from this blog & other resources? And that they don’t repeat the mistakes, we made in our lives?

Financial Education for Children is as important as their regular education. Sadly, we do not have in our school curriculum. However, you can start teaching your children, the basics of money, so that they become, more aware, more responsible and think in a better way about finance. It’ll not just help your children, but even you as a parent in many ways. Here, I present 9 things to teach your children.

How to save
Most kids today are indulged, like never before. All they do, is spend. The money mostly comes from one of the parents. The kid asks you for a 100 bucks to buy the latest thingamajig, you question them why, they answer you, and you give them the money. This generally, makes them believe that once they give you a “good enough” reason, the money’s in the bank (or their grubby li’l hands). You need to make sure, that kids understand how you save money. This will happen only, when they themselves, understand how to save money. Hence, encourage savings.

Let them save some money for their little goals (even big ones). If your kid wants to buy something, which you think can wait, encourage them to save towards its purchase. Whenever you give them some money for anything, ask them to save 25% of it for that goal. Apart from this, you can give them some small amount weekly to save for that goal directly. Please buy a piggy bank for your children. You can buy a fancy one or the clay one we had in our days It works!

How to keep track of money
You should teach your kids where the money at home comes from, where it goes and how much is saved. I’d ask them to maintain a simple table where they can write how much money they received, & when, from whom, & where it was spent. These 4–5 things are is good enough for a small child to start with. If you have a computer at home, you can make an excel sheet and ask your kid to maintain the account, while making sure, that things are very simple for the kid to understand. Don’t overdo it
Once they start doing this exercise, they’ll gain awareness of where they spend their money & to what extent. You can sit with them each quarter, and review the sheet. Don’t try to point what’s right or wrong. Just gently point out facts. That’s all.

How to pay what its worth for something
Have you ever faced a situation when your kid bought something and they were cheated & charged exorbitantly? Or demanded something from you, but they thought that it wasn’t that expensive?  Kids don’t always realize, just how much something costs. They just want it.

The best way to deal with this situation, would be to ask them upfront, what they think, is the price of something. If they demand a video game from you, they might not know how much it costs. So ask them, what they think is the price, & what is the maximum they’d like to pay for it. Many times, you will find that the price is much more than they themselves think. In which case, they might want to reconsider buying it.

I remember, when I was young, my brother & I demanded a video game from my dad. He fobbed us off a couple of times, but later he asked us, “Pata bhi hai kitne ka aata hai?” (“Do you know how much it costs”). We were puzzled, as we really didn’t know the cost. We assumed it’d cost us something like a 1000 bucks, but we later found, that it actually sold for more than 3,000 at that time. Once we knew the price and compared it to the value it delivered, it didn’t make sense to buy the game. We had much better, healthier entertainment options.

And guess what? Dad bought us the game, next year!

How to spend money wisely
Ask them their priorities, what they need this year, what their wishes are, and help them sort out their desires and their requirements. Ask them, what is more important? What’s secondary? This way, you encourage them to think in the right direction.

You are giving them an opportunity to understand difference between needs and wants. This might not be true for small kids below 10, but will be more relevant for children in between the ages of 10 & 18. Kids often times speak or figure out amazing things, which we adults don’t think about. Do this exercise and you might find that your kid has real smarts!

How to think about money
You should make sure that your child’s attitude towards money is shipshape; that they respect money, understand that it takes an effort to earn, and also understand the fact that, while money is important, it’s only secondary, as far as happiness & a content life are concerned.

Talk about money in front of them in a way, which gives them an appropriate view. Make sure, you don’t give them an impression that the family’s happiness isn’t as important as your job or business.  Read Personal Finance Mistakes

How to live on a budget
If you give your children pocket-money, make sure they live on it, the entire month and they do not come to you smack bang in the middle of month, asking for more, for things they could have managed with the same pocket-money. This happens only when children deviate from their monthly needs and carelessly spend on what they don’t need. While, they may ask for more, because of some emergency need sometimes, over a long-term, you should make sure they stretch with that pocket-money.

Children will understand budgeting better, if you yourself practice it (ouch!). When they see how you allocate expenses each month, and stick to it, chances are, they will replicate it at their level. While, this whole thing can be tough initially, help them out, by giving them the extra money they need in first 2-3 months and then restricting gradually.

How to invest
Start teaching your child, the different ways of investing. Teach them basic banking, how banks operate and what it means to earn interest on an amount. You can also buy them some games which teach investing. Ask them to deposit some amount with you and you can pay them interest per month.

When you give them pocket-money, say Rs 500 per month, ask them to deposit back Rs 250 with you, with the assurance that next month you will pay them 10% interest on that amount, ie : Rs 275 . Though you might be out-of-pocket by Rs 25, the knowledge you impart to them is priceless! This Rs 25 gives them the important message, that saving their money and investing regularly can increase their money many times over.

When they start earning later in life, this gyan will be something, they respect you for!. Also, remember to open a bank account for your child as soon as they turn 12-13 yrs.

How to exercise the entrepreneurial spirit
Don’t tell me you want your children to do regular 9-5 jobs! Don’t you want to instill some entrepreneurial skills in your children right from start, so that they know what they want to do in life and take an initiative to work along those lines?

The first step, is to talk about different ideas your children have. When they are small, they can have weird ideas, but listen to them, & ask them how they can make money from some idea. Ask them questions like “Can you think of some idea, using which, you can make money?”

My own brother who is 13 yrs old makes weird stuff out of junk which can act like a toy gun! He once said, that if he can make 10 of those and sell at Rs 20 each, there will be many friends of his who will be ready to buy it. Though he didn’t do it, he surely has the right attitude.

You can encourage your child to do some random / different / creative stuff for a few hours every day (during vacations at least) and pay them extra money for it. This will help them earn some money and also help you do some work for which you wanted to pay someone!

If you have a garden, you can ask your child and his friends to do some random things for which you wanted to hire a guy anyway. This has some advantages; First – your children will understand, it’s not that easy to earn money and they have to work for it. Second, you will help your kids to spend some time constructively, which they would have spent playing or roaming around or playing video games. And finally, your money stays at home

Thinking a bit bigger, maybe you can really involve your child and his friends and work on some month-long project… one, that has a whole business plan, revenue model and which then earns money for 1 month (may be this can be done in summer holidays). Wow… this seems exciting, talk to your child about this today and see the response.

How to handle credit
You should also start teaching your child, to handle credit. If you pay them Rs 500 pocket-money and in the same month they demand Rs 200 extra, you can give them that money, but now introduce them a concept of “credit”. Tell them that it’s not going to be free and you are cutting Rs 50 for next 4 months from their pocket-money and paying them just Rs 450. If you want to add some horror and suspense, make it 5 months (charge interest). This will make sure they ask for extra, only if they need to. Stick to this with discipline, and don’t fall for emotional atyachaar from your children (they are really good at it, especially girls!)

The previous point’s example can also be used here. If you are making some small project for them from which they can earn money, loan them some seed money like Rs 1000-2000 (as a venture capitalist) and then demand the money back after 1 month with interest.

Teach your children basics of money from the very start. These tips will act as a foundation for your child’s financial education and they can build upon these learnings in the future. Most of these tips are for children, but can be used for other people in your life, who may not be that good at personal finance. What say?

Some additional suggestions:
-     Instead of paying by cash or card for the kids, let them maintain & track their own cash & pay from their kitty for all their purchases (be it toys, cloths, snacks). Give them periodically a budgeted amount based on your experience. This will train them in managing a budget for a specified period.
-     Teach them basic Arithmetic using real money for their real life at an early age.
-     Help them maintain an XL sheet that contains all direct expenses done for them including fees etc. Give them some idea of the other household running cost also. All of them one day want to be free from all monitoring & supervision. When they know what it costs to maintain their lifestyle, they will find ways to generate at least that inflow faster!!  

Here is wishing financial prosperity to you and your family.

Warm regards,

Rohan Singal 

Link to our workshops 

Wednesday, 11 April 2012

Creating a new enriching relationship with money & prosperity

Let this blog find you having an enriching relationship with your money in this new financial year.

One common question we have in our workshops is “How to be financially strong?” I had written an article last year on “Getting out of the rat race”. Here are some additional thoughts based on latest experience:

Tax planning:
I recently heard from many people how the Jan – Mar 2012 salary was lower than other months in the financial year. Mainly because initially they had declared some tax saving investments, but later they invested much less. Check around you with salaried professionals, you may notice a very high number of people experiencing this: irrespective of their salary levels.

I remember when I was an employee; I had simply no connection with tax planning. I considered it a necessary evil. My simple logic was why lock Rs 100 for 3 years to save Rs 30 tax in the present. I would rather live with the Rs. 70 NOW. That was 15 years ago. I find that it is still true for many people.

Little did I know that this rule is a boon in disguise. The moment you invest the money for tax planning, it is no longer available to spend on impulse. Your system will work out ways to manage expenses within available funds. And silently you have a neat fund accumulated.

Limited awareness of expense pattern:
I used to think, saving and investments is for people who don’t trust their generating capacity in future. As long as I was earning enough to meet my lifestyle requirements in the current period, I was okay. I started tracking my daily expenses several times but would give up after a few days.

Leaving accounts, planning and compliance to accountants:
I always believed my job is to keep generating. Last 15 years I had little awareness of the regulations, compliance etc. beyond the basics. My CA would have to call me, ask for various data and remind me the dates on which I had to pay what amount of service tax, advance tax etc. I had done no planning for such payments most of the time. This April I looked at my accounts of last several years. I found that almost every tax payment had an interest component due to delayed payment.

Ignoring minor charges:
I rarely scrutinized my bank, credit card, mobile bill statements. Many times there were minor entries of some charges which I was unaware of. I simply ignored them using the principal of materiality. If the amount is very less, why care and waste your precious time!!

No planning or budgeting:
At work, we used to project financials of various borrowing companies to ensure their debt servicing capacity. We used to make realistic projections for next 5-10 years. Personal finance projections?? Never!! So even known expenses turned into surprises.

Life went on. 2 years ago a friend came on board as a partner in business. She had lived a life with an absolutely opposite style. When she was an employee, she used to calculate accurately her final tax outgo, 6 months before the year end. She had started investing regularly, early in her career and had her own tracking sheet for monitoring all her investments.

She started probing every line of expense in the business which I initially laughed at. She told me that it is not a matter of the amount. You take good care of every Rupee, it will stay with you and will invite all other Rupees also to join!! She started picking holes in my spending pattern. Some of the things she did appeared minor to me that time:
-     Get every unnecessary bank/credit card charge reversed. Else get the logic of it from the bank.
-     Revise the mobile plans for all the team members to get the best deal.
-     Never break a long-term investment for a short-term expense. Plan ahead, keep money aside in a liquid fund for known future expenses.
-     She even got me to discontinue some co-branded credit cards where I paid an annual fee, but never utilized any of the services.
-     She got me to track on an XL sheet all the bank accounts, credit cards and even the money in my wallet. All the balances were religiously tallied daily.
-     Follow up on all the tax refunds outstanding from Income Tax department.

These are normal practices but the point is I never practiced them, despite having a degree in finance.

I wonder how many people are in this kind of boat? Since I started thinking on these lines I found many people in a similar situation. Several of them had “invested” in Insurance policies unaware of the real benefit from them. Many others wondered whether the money decisions they had made earlier were valid now - the tendency is to maintain status-quo and hope for the best. I also thought that the only option is to make lots and lots of money and things will get handled. They don’t. You have to clean up the act now and then everything falls in place.

Here are my suggestions depending on your current station in life:
Cleaning connection with taxes & compliances:
-     Always know all applicable tax breaks for you. April is the best time to do so. There are some XL sheets that are available as free download that will allow you to accurately calculate the net tax. Find them. Else send me a mail & I will forward one to you.
-     Even though FY2012 is over, as a start: fill your salary items in the tax calculator made for FY2012 and check the taxes that were deducted by your company. And notice, how much tax savings went unused.
-     Understand your IT return properly. File the originals neatly. Have scanned copies of each year’s return handy.
-     Understand every communication from tax authorities instead of leaving it to your CA.
-     Understand all the clauses in your IT return.
-     File all returns in time. Your CA may remind you but he is not accountable for the returns. You delay, you pay the interest. And you are declaring to the creation that you don’t care about money.

For an entrepreneur / self employed professional:
-     Get the applicable registrations done proactively, be it service tax, TAN, Professional Tax etc. Ask some people who are in the same business for many years. They will give you some more tips.
-     If you charge service tax, transfer the service tax component in all receipts, to a separate liquid fund till it becomes payable.
-     If you deduct tax at source (TDS) on a payment, deposit the TDS amount with tax authorities within a day or two. Online payment facility is now available which is simple & convenient.
-     Basically any money that does not belong to you, must be kept away or deposited immediately

Expense tracking, cashflow budgeting:
-     Keep an XL sheet with 3 columns (inflow, outflow, running balance) for every bank account, every credit card, cash at home. Here is a picture of the sample sheet.

-     Keep updating it regularly with current expenses & inflows. Enter every financial transaction including credit card swipe.
-     Categorize the expenses. Also project the future cashflows.
-     You can include all your take home salary/inflows and EMIs, house rent and other known expenses for each month. Calculate running balance.
-     This exercise will surprisingly reveal to you some interesting patterns. Once you start this as a practice it becomes very simple, saves lots of time & stress.

Financial Freedom Factor tracking
-     Calculate your Financial Freedom Factor (FFF) and ensure that it is improving with time (refer my  article on “Getting out of the rat race”. Send me a mail if you want the latest XL sheet to calculate FFF)

Encouraging team members to be financially strong: For department heads | business heads | CEOs | promoters
We keep hearing from promoters and CEOs that they are looking for ownership, entrepreneurship in the employees. The dream is that they take care of company’s money like their own. Here is one suggestion:
-     Check how many of your employee’s take home in Jan – Mar 2012 was less than previous months (excluding bonus, if any).
-     For all of them, organize an awareness session: The beginning of financial year is the best time. Make them aware of the possibilities and benefits of tax planning. Make the session interesting and inspiring. You can instill financial prudence in them. When they are financially prudent for self, they will
o    respect and thank you for making them financially strong
o    bring a lot more ownership at the work place
-     If you want help in such a session, tell us. We would be glad to assist you.

Finally: if you are already taking care of your finances really well, then it is the best time to mentor & coach people around you to build a strong financial backbone! The joy of witnessing a person becoming self-dependent and financially strong is incomparable.

Here is wishing financial prosperity to you and your teams.

warm regards,

Rohan Singal

Link to our workshops 

Friday, 6 April 2012

A Layover from Heaven - a true story on top class customer service by an airline

Just sharing an article that I found really inspiring.

A Layover from Heaven
I flew almost 150,000 miles in 2011 and it took until December 22 of that year for something positive (and worthy of writing about) to happen to me. Yes, I could have written an article at least once a week about what not to do, based on the crappy service and frequent lies most airlines dish out, but I'd been on the lookout for something great to happen - something worth sharing.

After a week long family trip to Park City, Utah, my family and I returned to the Salt Lake City airport, eager to get back home for the holidays. (There were four of us, seven bags, and a connecting flight through Denver, to be exact). Sure enough, our flight was delayed. Not to worry, though - it was only delayed forty-five minutes and, with a two-hour layover in Denver, we'd be OK. And then the announcements started. Every once in awhile an announcement would let us know the flight was going to be a little later than expected. In the end, we took off almost ninety minutes late. That's pretty normal.

Except that it wasn't.

For a change, the gate agents told the truth. Instead of keeping us in the dark like most airlines, the women at the counter gave us frequent updates about what was happening. For a change, the gate agents were empathetic, understanding, and helpful. They made announcements specific to those people with connecting flights and explained what the options were. They calculated the revised layover times, and showed passengers how far their next departure gate was from our Denver arrival gate. For a change, they put four people at the gate to answer our questions, rather than leaving the counter empty. I was pretty impressed with what I was witnessing.

And then things got really interesting.

The gate agents proactively began making announcements with timesaving ideas. First, they made it known that we had five passengers destined for New York that would have the tightest connection. They asked that when we land, all passengers remain seated until these five passengers got off. It's not the first time I've heard of that concept, but is the first time I've seen it happen prior to boarding the flight.

Then, the gate agents asked for anyone willing to gate-check bags to come forward and turn them in right away (this was 30 minutes before our plane had even arrived in Salt Lake City). The agents explained that anyone willing to do this would still get their bags on the jet bridge when we landed, but this process would speed up boarding by approximately ten minutes because less people would be trying to jam their carry-ons into the overhead bins. People lined up with pleasure.

When we boarded the plane, the flight attendants greeted us with smiles and expedited the takeoff by helping with bags and seat assignments. We were in the air before we knew it. The pilot came on and apologized for the delay with a compassionate tone and delivered a little something unexpected. "Because of the inconvenience, folks," he said, "we're going to go ahead and allow everyone to enjoy all twenty-four channels of DIRECTV with our compliments." This might not seem like a big deal, but to the 150 passengers onboard it was pure gold.

Just before our initial descent, a flight attendant made an announcement reinforcing the earlier request to let the New York-bound passengers off the plane first. She even had those five passengers raise their hands and asked the rest of us to look around and find the five - so that we knew to let them pass. Guess what? The folks headed to New York made their flight.

So did we.

Let's review what just happened here and make it repeatable for your company. In other words, when things don't go as planned (maybe you don't fly airplanes for a living, but I'll bet you've had to tell your customers about a late delivery at some point), here's what to do:

1. Be pleasant. You're already delivering bad news; there is no need to deliver it with a bad attitude. In fact, being friendly will go a long way to earning the understanding of your inconvenienced customers.

2. Be empathetic. If you don't care about your customer, they're certainly not going to care about your explanations (er, excuses). Put yourself in their shoes - imagine that what's happening to your customer is actually happening to you. Once you know how your customer feels you'll be better prepared to help them. Which leads me to my next point...

3. Be helpful. Your customer needs your help. Your customer is depending on your help. Your customer wants your help. them! Even a little bit. Your mission is to help them the best (and the most) that you can.

4. Be solution-oriented. Nobody wants to hear what you can't do. Nobody wants to hear that "there's nothing anyone can do." There's always something. Always. So focus on what can be done and deliver that right away.

5. Be consistent. Be sure that everyone on your team knows what's happening and how you're solving the problem. Your customer will automatically feel better if the entire company is on the same page. Just think of my story above...the gate agents, the flight attendants, the pilots were ALL focused on making things right.

6. Be thankful. Thank your customers. Thank them for their understanding. Thank them for their cooperation. Thank them for their business. Thank them for trusting you. Thank them. Thank them. Thank them. Oh, but don't just say it. Do it. Show them that you're thankful by serving them well and by doing your best. Go above and beyond to make them feel your gratitude.

7. Be better next time. There are two ways to be better - either by preventing the problem from happening in the future, or by being better prepared to react and respond to the problem in the future. I suggest you work on both strategies.

That's a lot to learn on a layover, no? Put this one down in the history books, folks. An airline gave great service. They just might be on to something here!

Just in case you're wondering what airline I flew - it was Frontier Airlines. And the crew working the flight both on the ground and in the air were top notch. If you're planning a trip, give Frontier a try. I hope your experience is just as remarkable as mine. 

Noah Rickun is a Gitomer Certified/Audience Approved Speaker who delivers customized and personalized seminars on sales, customer loyalty, and personal development. Noah is also a contributing author to Jeffrey Gitomer's new book, Social BOOM! To book Noah for your next event, visit or contact the friendly folks at Buy Gitomer via email or by calling 704-333-1112.