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TIMES PERSONAL FINANCE

20

BEST
FUNDS
TO BUY

Equity: Large Cap

1 Year

3 Year

5 Year

3 Year

5 Year

1 Year

3 Year

Religare Invesco Growth Fund

2.85

19.71

10.56

Franklin India High Growth Co.

8.04

29.33

16.05

L&T India Prudence Fund

10.54

21.93

--

Birla Sun Life Frontline Equity

-0.03

19.4

11.18

ICICI Prudential Value Disc

8.3

28.8

17.41

SBI Magnum Balanced Fund

8.81

21.12

12.45

IDBI India Top 100 Equity Fund

2.76

18.1

--

SBI Magnum Multiplier Fund

8.6

23.5

11.52

Tata Balanced Fund

7.5

20.88

14.16

Equity: Mid Cap

Equity: Multi Cap

1 Year

THE TIMES OF INDIA, NEW DELHI


MONDAY, NOVEMBER 23, 2015

Hybrid: Equity-Oriented

Equity: Tax Planning

5 Year

Debt: Income

Mirae Asset Emerging Bluechip

15.82

33.98

22.16

Axis Long Term Equity Fund

7.17

29

18.63

Birla Sun Life Dynamic Bond

11.15

10.22

9.97

UTI Mid Cap Fund

6.69

33.3

18.28

Reliance Tax Saver Fund

-3.95

23.98

14.44

Franklin India Dynamic Accru

11

9.2

9.93

JP Morgan India Mid and Small

11.57

31.8

17.43

Birla Sun Life Tax Relief 96

8.53

23.87

11.08

Kotak Medium Term Fund

9.95

--

--

22

return in
past 3 years

The 3-year returns of


L&T India Prudence
Fund are the highest
in its category

Figures are % returns. 3-year and 5-year returns are annualised.

Help the senior citizens

Make your child a savvy investor

Dont expect the elderly to keep themselves updated


on technology to carry out basic financial transactions

Give your child a headstart in investing by teaching her the basic financial concepts

UMA SHASHIKANT
CHANDRALEKHA MUKERJI

fter he lost money in the


Harshad Mehta scam in
1992, Jayaram P.D. stopped
investing in stocks. Staying away from stocks was a
terrible mistake because I lost the opportunity to build wealth, says the
Malappuram-based bank manager. He
cant turn the clock back, but Jayaram
has made sure that his teenaged
daughter Aparnna (see picture) doesnt
repeat his investing mistakes. He has
introduced Aparnna to the basics of
banking and encouraged her to learn
about financial concepts and investment products. Two years ago, she
topped the South zone in the National
Financial Literacy Assessment Test
(NFLAT). The exam is conducted by
the National Institute of Securities
Market (NISM) for students of Classes
VIII to X and tests basic financial
awareness. Now 15, she already knows
about the different types of insurance
covers and how mutual funds work.
In Bengaluru, children listen with
rapt attention as a teacher explains to
them the benefits of budgeting and
saving. Nothing exceptional about
this, except that the teacher is 18-yearold Neha Chaudhari (see picture) who
topped the Western zone in the NFLAT
exam and now holds money management workshops for children from lowincome families. I hope to inculcate
sound money habits in these children
through the Money Tree initiative,
she says. She has even co-founded a
company that is developing eco-friendly water sprinkler systems.
Nehas parents Rajendra and Monica regret the bad financial decisions
they made. We lived in a rented house,
when we could have easily put that
money in an EMI and built a long-term
asset. Both of us had all our savings in
bank deposits when we could have diversified some portion into equities,
rues Rajendra. We had no one to guide
us but its heartening that Neha wont
repeat our mistakes.
Aparnna and Neha didnt pick up
their money skills at school. Financial
literacy is still not a part of the school
curriculum. Money management is
an essential life skill. A course on financial literacy would help the child
understand its importance early, says
Charan Singh, RBI chair professor at
IIM-Bengaluru. A small beginning has
been made with the CBSE partnering
with NSE to teach financial literacy in
schools. The courseFinancial Market Management (FMM)will be
taught to students of Class IX and X.
But it is a vocational course and not
mandatory for all students.
If the purpose of education is to
prepare a child for the future, personal finance cannot be left out of the curriculum. However, our education system is not geared to impart financial
literacy. It teaches our kids science,
economics, humanities and mathematics, but doesnt prepare them for the
real world. What comes out of the assembly line are professionals who earn
well but have low money management
skills. Even IIT grads, software engineers and those in the financial services sector are all at sea when it comes
to investments, tax planning or saving
for retirement. They learn their money lessons the hard way by burning
their fingers, which can dent their financial future.

WHAT PARENTS CAN DO


In lieu of schools, children have to rely
on their parents for financial guidance.

HER MONEY QUOTIENT


Manages her own bank
account but has not yet
started investing.
Knowledge of finance came
handy when she co-founded
a company that makes ecofriendly water sprinklers.

NEHA CHAUDHARI

18 years

Bengaluru, studying in Class XII.


Topped the NFLAT exam in the
Western zone in 2013.

Conducts Money Tree


workshops where she
teaches finance to children
from the low-income group.

HER MONEY QUOTIENT


Does not have a bank
account but familiar
with banking rules and
procedures because
father is a banker.
Has basic understanding
of different types of
insurance policies and
what they offer.

APARNNA J.N.

Is familiar with capital


markets and how mutual
funds work.

16 years

Malappuram, studying in Class XI.


Topped the NFLAT exam in the
South zone in 2013.

HIS MONEY QUOTIENT


Has a savings bank account
but transactions are
conducted by his parents.
Is a diligent saver. Prize
money and cash received as
gift are promptly put into the
bank account. But he has not
yet started investing his
savings.
15
yrs

SIDDHANT BHARDWAJ
Kolkata, studying in Class X.
Topped the NFLAT exam in the
East zone in 2013.

Wants to save enough to part


fund the cost of his higher
education.

HIS MONEY QUOTIENT


Manages his own bank
account.
Diligently saves his pocket
money and cash received
as gifts.
Understands different
types of mutual funds and
how they work.
With help from his father,
has invested `30,000 of his
savings in equity mutual
funds.

Besides teaching them about the birds


and the bees, you also have to teach
them about SIPs and EMIs. For parents, this can be an opportunity and a
challenge. Children tend to trust their
parents and will imbibe any habit you
instil in them at an early age. If a child
grows up learning financial prudence,

ANIRUDH ROY

16 years

Ghaziabad, studying in Class XI.


Stood third in the NFLAT exam in
the Central zone in 2013.

he will become a better investor and


smart spender when he starts earning.
Ghaziabad-based Anirudh Roy (see
picture) is a diligent saver and avid
investor. Helped by his father, he has
already put about `30,000 in mutual
funds while another `20,000 is in bank
deposits. I am sure he will be able to

take smart financial decisions when


he starts earning, says his mother
Sunanda Roy. However, not all parents
will be able to give their child a headstart because the advice they proffer
might be flawed. If an individual has
had a bad experience with an asset
class or an investment product, his
views about it will be biased, says
Abhishake Mathur, head of investment advisory services at ICICI Securities. Other parents are uncomfortable talking about money. Culturally,
we are taught that at a young age we
should not be talking about money. But
in the real world, a lot depends on how
we manage our money, says Aashish
Somaiyaa, CEO, Motilal Oswal AMC.
TAKE BABY STEPS
Money lessons should begin with
teaching them the importance of saving. It is important to teach them how
budgeting can help live within your
means, that saving is rewarding and
about the magic of compounding.
It is not necessary that all lessons
are about managing money directly. It
is also about inculcating habits and the
right attitude. Prudent use of resources, whether it is electricity, water or
food, spending carefully at a shop and
separating needs from wants are also
key lessons for your child.
Subrat Mohanty, Senior EVP at
HDFC Life Insurance uses an innovative technique to teach saving lessons
to his 6-year-old son. If he does two
chores every daywatering a plant
and keeping his things back in place
he gets `10. So he understands the concept of earning and how savings can
accumulate over time, he says.
Gamification of concepts and storytelling can be a great way to break
down complex concepts to a small kid.
Also, it ensures the lesson stays with
him for long, says Mohanty. At the
Kidzania entertainment parks, children get a taste of how money works
in the real world when they convert
their tickets into playmoney. The kidzos can be used to buy stuff and pay
for rides. They can even work at the
Yes Bank ATM inside the park to earn
kidzos, says a Yes Bank official.
Srikant Bhagwat, Managing Director and Principal Advisor of the Bengaluru-based Hexagon Wealth Advisors has been promoting an interesting
concept among kids called The Triple
S Method. Kids are told to budget
their pocket money under three
headsSpend, Save and Share. The
ratio is left to their own discretion. But
the rules are that whatever is Spent
is gone; whatever is Saved the parent
doubles with their contribution and it
goes away into a mutual fund; and
Share or charity will get them returns not in a monetary sense but in
the form of lasting joy, explains Bhagwat.
CAN MONEY TALK BE A PROBLEM?
Some people argue that making financial literacy as part of the school
course will put off children who will
see it as a chore.
Others say that money talk at this
stage could skew the childs value system where he starts equating wealth
and prosperity with good and desirable. Vikram Kuriyan, Director, Investment Lab at the Indian School of Business, Hyderabad, doesnt think it is a
great idea to focus childrens minds on
money. However, lack of knowledge
could lead to their exploitation in future. Education is an effective antidote
but it must include an ethical component, he says.

Awareness of these basic financial concepts will ensure that when she starts her career,
your child wont repeat the investing mistakes you may have committed

How budgeting
can help you
live within
your means.
Problems
associated
with taking
more debt
than you can
afford.

Benefits of
saving for
goals and
how
compounding
can work
wonders in
the long
term.

INTERMEDIATE
KNOWLEDGE

Basics of how
banking
works. Types
of accounts,
rules and
regulations,
cheques,
credit and
debit card and
online usage.

Importance
of protection
against
unforeseen
crisis. Types
of insurance
covers and
how they
work.

Basic investing
options
available to
retail investors,
including bank
fixed deposits,
recurring
deposits and
small savings
schemes.

ADVANCED
SKILLS

Difference
between
simple and
compound
interest and
how it works
in cumulative
and noncumulative
deposits.

Basics of
how mutual
funds work
and the
benefits they
offer such as
diversification
and expertise.

BROUGHT TO YOU BY

Basic
knowledge
of how stock
markets work
and impact
other
investments
such as mutual
funds and
Ulips.

make a decision. But not all of them like


to spend that time working on finances.
Sadly, the process of financial transactions takes too much of their time and
energy. Instead of offering the 0.5% or
1% higher interest rates, banks could
instead offer home services to senior
citizens. Phone banking is extremely trying on patience, and Internet banking
does not offer comfort. Banks can employ
a team of caring relationship managers
who specialise in senior citizen services.
The biggest challenge for senior citizens is technology. Many seniors are
seriously challenged by smartphones,
login protocols and menu choices in todays user interfaces. To assume that
elders can learn to use technology easily
is to overlook the learning process of the
mind that seeks cumulative continuity
and assimilation. Without a comprehensive understanding of how things work,
elders are unlikely to be confident about
logging into an interface and follow instructions. That is not how they have
lived and learned. The benefits a bank or
financial entity has earned from technology should be used to cross-subsidise
personalised services for senior citizens.
Everyone hates taxes. Seniors hate it
even more, because of the paperwork

THIS WEEK

The author is Chairperson, Centre for


Investment Education and Learning

Credit card payment through EMIs

Banks enable credit card dues to be converted into a personal


loan with EMIs where the outstanding amount is repaid over a
period of time, typically 6-18 months.

The card issuer offers the option to convert the dues to loans
either at purchase, or at a later date when outstanding is
overdue, depending on the credit history of the customer.

The card issuer usually specifies the conditions for which


the EMI facility is available in terms of specific purchases
from select stores and minimum spends.

The EMI facility virtually converts the credit card into a


consumer loan, which is typically at a lower rate. The
cardholder is emboldened to spend more.

When the dues are converted into EMI for a defaulting


credit card holder, the terms can be more stringent in
terms of rate and time to repay.

ARE YOU READY FOR


THESE MILESTONES?
Are you ready to buy a house, retire
early, start a family, buy a car or launch
a business? Find out if you are financially prepared for these key milestones.

involved. It does not help that a new class


of super-seniors has been identified with
a basic exempt slab of `5 lakh. Mr. Joshi
has a house in Mumbai and its rent alone
will make him a tax paying super-senior.
Given the demographic profile of the
country and the great pride in India being a young country, what could we lose
by exempting anyone over 75 from filing
returns or paying taxes?
With technology, one would have assumed that the amount of paperwork
would have reduced. Sadly no. There are
many who write to me about having to
renew the KYC with the bank every three
years. The pain of producing the PAN
card or facing a large TDS in the fixed
deposit; the woes of KYC and in-personverification for mutual funds; the needless trips to the post office on maturity
of deposits; and the nightmare of physical share certificates worth a fortune, but
still not converted to demat. After the
Aadhar card, there must surely be a simpler way to identify citizens easily? Why
should the elders pay heavily for the failure of the government to put an enabling
infrastructure that serves its own purpose in place? An organisation seeking
information for its own compliance
needs to fund and facilitate the process
with least inconvenience for customers.
The senior citizens I know grapple
with these challenges in their own ways,
some more risky than they perceive.
Many have their accounts tagged along
with the wealthier kids accounts, so they
receive service and attention. Some have
trusted CAs. In most cases, there is a
relative, friend or trusted servant, who
holds everything from the ATM PIN to
copies of the documents, and does all the
running around either for a fee or out of
goodwill. There are innumerable stories
of fraud. While the killing of a senior
citizen to steal jewellery receives a lot of
media attention, the polishing off the
bank balances or siphoning off investments finds no mention.
What can be done to make life easier
for super seniors? First, the onus of identifying them and verifying their address
should be on the local police. Enabling
technology that updates their Aadhar,
PAN, KYC and all other identifying documents should be handled by the police
and not by the seniors themselves. Second, paperwork such as tax returns, 15G,
15H, PAN proof and such should be done
away with. It is fine to recognise a small
group of citizens for their work and allow
them the luxury of tax-exempt lives in
their senior years. Third, personalised
services for financial products should be
reintroduced for the benefit of senior
citizens, whom the relationship manager
will visit, work with and deliver home
services. Fourth, toxic financial products, dubious deposits and complex
structures should be banned from being
sold to seniors. Wealth management for
senior citizens should be subject to a
tighter compliance process, where recommendations and performance are
monitored to ensure there are no frauds.
I wonder if high-powered committees
that analyse problems and offer solutions
would consider senior citizens and their
wealth as a subject worthy of examination?

SMART THINGS
TO KNOW

LOCAL FMCG COS


CAN BE GOOD BETS

COVER STORY
Now on
Android
& iPad

STAY UPDATED
WITH THE SIMPLE WAYS
OF MAKING MONE Y.

Understanding
the charges
of various
investment
options,
including
insurance
plans, Ulips
and mutual
funds.

r. Joshi has been a long time


reader, following my writing since 2003. He still
sends me long emails. He
was a 65-year old retired
engineer then, offering consulting services. He is nudging 80 today. While still
active, he rues the fact that his financial
life has become complex. He is a simple
investor in the post office, bank deposits
and mutual funds, but struggles with one
thing or the other. Wealth management
for very senior citizens has not received
enough attention. How we treat those
whose contributions have been in the
past is a reflection of the character of a
society. We have failed our elders in many
respects, and finance is not an exception.
The biggest asset of senior citizens is
their time. They can pore through long
forms that others sign without a thought.
They can discuss and debate before they

WHAT YOUR CHILD MUST KNOW ABOUT FINANCE


ESSENTIAL
INFORMATION

Source: Value Research

Homegrown FMCG rms have


grown at a fast clip.

ESOPS MAY NOT BE


A GOOD IDEA
Dont be blinded by the lucre
of stock options

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