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Financial education

Financial education

TLDR: Financial education, lack of formal training, not school level or college level courses.

  Let us be honest with each other. Don’t you wish you had known what you know now, some 10 to 15 years earlier? If only we can go back in time and advice our younger self on all the things that you could have done better or differently?

  No, i am not talking about giving stocks tips to your younger self to go buy Apple, google, Amazon or in the Indian context Infosys or HDFC, even though that would have been great too.

I am talking  the strength of compounding and the benefits of investing, instead of trading and the obsession with real estate. I have spent a good number of years trading before I discovered the fundamentals of investing from the gurus and revised my ways to reflect that. The strangest thing is, each generation it seems goes through a similar cycle in their financial journey.  The steps looks something like this on your investment journey

  1. Complete their education

  2. Join the workforce

  3. Starting saving

  4. Discover the stock market

  5. Buy and sell - daily, weekly or monthly for small gains

  6. “Invest” in ULIPs or other investment linked insurance products

  7. “Invest” for tax savings

  8. Discover intraday

  9. Discover options and futures

  10. Get into currency / crypto (add the latest fad here)

  11. Lose a bunch a money

  12. Start reading the investment gurus

  13. Try to emulate one

  14. Fail

  15. Read more investment books and gurus

  16. Realise that there is no perfect investment style or philosophy

  17. Develop a plan that is aligned to your personality, temperament and risk profile

  18. Fine tune the investment style for the next 3 to 5 years

  19. Wish someone had told them on how to reach step 17 directly

This cycle seem to repeat for everyone give or take a few steps. Wish it had not taken me 12+ years to get here.

What can be done differently

  The educational system needs to be updated to reflect the reality of financial system and markets. Be it in school or college there is no coverage on how to manage your personal finances, investments, Insurance. Nothing of that sort, i don’t know if it has changed recently but I am pretty sure it hasn’t in India.

Wishing for a change in the education to include additional topics in the slow moving pace of the Indian education board is as good as buying a lottery ticket and expecting to become millionaire. It is theoretically possible but the odds are definitely stacked against you.

What can you do?

  Start with the next generation, your kids, nieces and nephews. Teach them the fundamentals of money, saving, investment, charity. The ideal age for them to learn these concepts would be when they reach teenage years, but nothing stopping you from starting earlier if the kid shows interest. It is not going to be easy, they have the attention span of gold fish and stock trading and investments are not exactly the most interesting of topics for them.

I also wish there was an easier option to gift kids stocks or mutual funds or indices as birthday gifts that compound in value over the long term. They can see the value of the funds growing every year and potentially they would want to learn how it all works. One can always dream, can’t we?

Do you have any thoughts on your investment journey? Advice for the next generation. Leave your comments below.

Happy Investing - #MyFatFIRE

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