The children’s central park in our housing complex is a busy place. While children are busy sliding and swinging their chaperones are busy networking. Finding out who stays where, whether they are owners or tenants and many more related but irrelevant questions. I am usually the odd one out, the mother who claims that she works but is in the park every evening and if weather permits even late afternoons in winters. So I get a lot of curious questions on what I do.
“Aunty I work in the space of Financial Education especially targeted at women”
I get a very disinterested “Oh” and Aunty moves on to put another slice of apple in her granddaughter’s mouth.
Mrs. Khanna who was now on her third round of Kapaal Bharti is suddenly interested. “Please meet my daughter, she is clueless about her finances”.
“Sure when can I meet her?”
“I think Saturday evening should be fine. Just drop by casually”
“Okay will do that. What’s your house no?”
“432 Ground Floor, house with big rose bushes”
“Oh yes, I have seen it. Will be there at 5:00 pm on Saturday”
Mrs. Khanna, I gathered was as obsessed with making her daughters independent in all aspects as she was dedicated towards her yoga. I was very impressed with her drive. It is not every day you meet parents who appreciate the need for making their daughters financially independent. Her daughter Dolly, however, was another story. It always amazes me when I meet young girls who are managing successful careers but ask them what are you doing with your salary? “I give it to Papa”. “I have no clue what to do”. “I spend most whatever is left is in my savings account”
Initially, I would get agitated but having interacted with many women I now realize that 3 things keep young girls from taking charge of their finances. Solve it and you would have got many on the path of financial independence
Imagination or lack of it to be more precise. When you are young in your early 20s it is very difficult to imagine old age and the attendant problems. So when you cannot imagine a problem appreciating a solution for the same is a tad difficult. To be honest it is always easy to imagine good things like a dream holiday, a luxury cruise or a fancy car. So the trick is to talk about what someone can imagine. I now always discuss ways and means to accumulate wealth to make these dreams a reality. Investments done to meet these goals give them the first taste of how money multiplies and how can they with little discipline and help grow their money.
Second thing afflicting our girls is what I call as the “Cinderella Syndrome”. We raise our girls to believe that they need someone to take care of them. This is the most amazing dichotomy of our patriarchical society. World over women are the caregivers to their children and elderly at home. But when it comes to their own physical and financial well being we make them believe that they need someone else to take care of them. So deep-rooted and widespread is this belief that it will take a lot of work to change this. We need many more mothers like Mrs. Khanna to bring a change in our homes to bring up our daughters as independent individuals. Dolly sits with a blank face as Mrs. Khanna and I discuss merits of financial independence. I am by now used to this disinterest and know it will take more than one meeting to impress the importance but Mrs. Khanna a feisty Punjabi that she is getting agitated. She almost yells at her daughter “Beta don’t depend on anyone to be your financial plan, whether it’s your spouse, the government, a financial advisor, or your family. All of those things can be taken away, for one reason or another. The only person you can rely on to be there for you your entire life is yourself.” Dolly nodded I understand let’s draw up some investment options and then excused herself to make an urgent call.
I am satisfied this is more than I achieve in most of my first interactions. A beginning has been made all thanks to Mrs. Khanna’s determination.
As I push myself back on the sofa to enjoy my cup of Tea I see Mr. Khanna enter with a suspicious look on his face. “Are mutual funds investments safe? I have recently started a SIP 2 month back and it is right now negative”. Well, this brings me to the third deterrent which is true not only for young Girls but for a large population irrespective of the gender. Fear of loss from more aggressive products like Mutual Funds. This fear largely stems from a lack of knowledge of the product. Mutual Funds broadly are of two types Equity and Debt. Equity Mutual Funds are meant for long-term wealth creation. If one is looking for short-term investments debt mutual funds are the right product to invest in. You can read more here on “How to invest” this is a ready reckoner to choose correct investment products.
Equity-backed investments are most effective in beating inflation and creating wealth over the long term. To appreciate this, one should understand the source of equity profits. The ultimate source of profits in equity is the general growth of the economy. The fear that people and Mr. Khanna have is that of volatility.
The daily noise from the stock markets is such that the overwhelming impression we get is of volatility. However, this is an illusion. If you were to look at the equity markets once every five years, you would get the following (annualised) returns: 6.5, -1.3, 81.4, -0.7 and 12.2. That makes it pretty clear that it is the daily noise that we need to avoid.
I am hoping that this explanation has satisfied Mr. Khanna and he will stop tracking his and his daughter’s future portfolio on a daily basis!