How Indian parents failed to teach right financial planning to their children
ET CONTRIBUTORS|
Jan 18, 2018, 07.34 AM IST
By Anuvab Pal
"I told my son to get married by 30, buy gold, a house, a car, set up fixed deposits, get a job with a prestigious global company in finance, engineering, medicine, something permanent, and you will have a happy life," said an older gentleman to me on a recent flight. He, like all Indian men of a certain age, seemed confident that this was good, stable economics. All his son would have to do was follow this man's simple steps to gain stable financial bliss.
"My son doesn't agree. He's doing some 'creative' job, not a real multinational job, saying he needs time to discover who he is. All that is rubbish," said the gent irritated. I didn't have the courage to tell him that in 2017:
* Creative jobs were more real than MNC jobs because they were based on a skill that would most likely outlast the multinational.
* Discovering oneself could be huge income. There were people making YouTube videos sitting in their bedrooms talking about their private life and making more than an engineer, banker or doctor would ever make.
* I also didn't have the courage to tell him that everything Indian parents had taught their children about financial planning was wrong. It wasn't their fault. They followed the rules —stable assets, stable companies, low risk, bricks and mortar — till all those things became bad things that actually diminish careers.
"People in India over-50 are products of a very socialist system, hugely mistrusting capital markets. Which is why mutual fund ownership is so low and every time the markets tank, they sell all their stocks. They think if they join a big company, their salary is sorted for life. They forget that today, a big company can disappear overnight. As Mukesh Ambani mentioned in a recent speech, "Data is the new oil." He should know, he owns a lot of data and oil.
Then there's property. Sure, there was a time when land meant wealth, and that'll probably last another 100 years. But today's young, living in a shared economy, can't fathom the idea of having an asset that's complicated to sell — or, heaven forbid, paying off an EMI.
As a 30-something explained, "My parents say keep buying a house. But what if I want to go live in Barcelona for a few years? I don't know want to tie up all my money in a 2BHK dealing with irritating tenants or leakages. They also say gold. This is digital India, not Ali Baba and the 40 Thieves!"
It is also how they think about carbuying in this age of shared taxi apps, and about having a full-time cook in the age of food delivery apps, and really about every other life choice including finding love forever in the age of dating apps. Essentially about commitment.
And it fits into the world they grew up in. Nobody works for 20 years anywhere, or gets a flat from their company. And one's job could become obsolete because of an app or a robot or demonetisation or outsourcing no matter how hard one works. So, none of it matters.
A 50-year-old senior executive at a bank told me, "When I got my first bonus, I saved it. The first thing I saw ayoung 30-year-old employee at the bank do with his first bonus was resign, buy a first-class ticket for a fivestar hotel vacation. I asked him, 'Shouldn't you be saving that?' He said, 'What for?' I said, 'The future.' He said, 'The future is later.' That's how they think."
The older man on my flight had clearly no idea of all this. "Choose a good public sector bank, put away your capital at 8% and forget about it. That's all you need in India," he said confidently. The tragedy was that it was only a matter of time before India would forget about his capital also.
"I told my son to get married by 30, buy gold, a house, a car, set up fixed deposits, get a job with a prestigious global company in finance, engineering, medicine, something permanent, and you will have a happy life," said an older gentleman to me on a recent flight. He, like all Indian men of a certain age, seemed confident that this was good, stable economics. All his son would have to do was follow this man's simple steps to gain stable financial bliss.
"My son doesn't agree. He's doing some 'creative' job, not a real multinational job, saying he needs time to discover who he is. All that is rubbish," said the gent irritated. I didn't have the courage to tell him that in 2017:
* Creative jobs were more real than MNC jobs because they were based on a skill that would most likely outlast the multinational.
* Discovering oneself could be huge income. There were people making YouTube videos sitting in their bedrooms talking about their private life and making more than an engineer, banker or doctor would ever make.
* I also didn't have the courage to tell him that everything Indian parents had taught their children about financial planning was wrong. It wasn't their fault. They followed the rules —stable assets, stable companies, low risk, bricks and mortar — till all those things became bad things that actually diminish careers.
"People in India over-50 are products of a very socialist system, hugely mistrusting capital markets. Which is why mutual fund ownership is so low and every time the markets tank, they sell all their stocks. They think if they join a big company, their salary is sorted for life. They forget that today, a big company can disappear overnight. As Mukesh Ambani mentioned in a recent speech, "Data is the new oil." He should know, he owns a lot of data and oil.
Then there's property. Sure, there was a time when land meant wealth, and that'll probably last another 100 years. But today's young, living in a shared economy, can't fathom the idea of having an asset that's complicated to sell — or, heaven forbid, paying off an EMI.
As a 30-something explained, "My parents say keep buying a house. But what if I want to go live in Barcelona for a few years? I don't know want to tie up all my money in a 2BHK dealing with irritating tenants or leakages. They also say gold. This is digital India, not Ali Baba and the 40 Thieves!"
It is also how they think about carbuying in this age of shared taxi apps, and about having a full-time cook in the age of food delivery apps, and really about every other life choice including finding love forever in the age of dating apps. Essentially about commitment.
And it fits into the world they grew up in. Nobody works for 20 years anywhere, or gets a flat from their company. And one's job could become obsolete because of an app or a robot or demonetisation or outsourcing no matter how hard one works. So, none of it matters.
A 50-year-old senior executive at a bank told me, "When I got my first bonus, I saved it. The first thing I saw ayoung 30-year-old employee at the bank do with his first bonus was resign, buy a first-class ticket for a fivestar hotel vacation. I asked him, 'Shouldn't you be saving that?' He said, 'What for?' I said, 'The future.' He said, 'The future is later.' That's how they think."
The older man on my flight had clearly no idea of all this. "Choose a good public sector bank, put away your capital at 8% and forget about it. That's all you need in India," he said confidently. The tragedy was that it was only a matter of time before India would forget about his capital also.
