Schools will soon be closing for summer vacations, and we don't want our kids to kill their time and strain their eyes watching TV, or pestering their grandparents all day. So, most parents would be contemplating to send their kids for dance, music or painting classes, or may be enroll them for summer camps, or for vedic maths or abacus classes to advance their number skills. We want them to do something concrete, to keep them occupied, while they pursue a hobby or build their extra curricular skills or social skills. However seldom we would touch upon their financial management skills.

Vacations is a good time to introduce your kids to money skills and in fact setting the path for growing of a financially savvy individual. We have listed down some activities that may be helpful in putting the vacations to some constructive use.

Teach the money cycle: The rudiments of financial literacy lies in the money cycle: 1. Inflow of money 2. Spending 3. Saving. This summer, the first thing you can do is explain the concept and elements of the money cycle to your kids. To secure your child's interest, you can use various techniques for making learning more fun for the kids. You can engage them in a daily activity like cleaning their room, or watering the plants, or reading a book and attach an allowance on completion of the activity. You can also give them an allowance on special occasions like participating in a marathon, or helping mum in the kitchen if guests arrive, or for eating spinach in dinner, and the like. Also you must keep in mind, that you give them only as much allowance as you mutually agreed initially, stick to your policy, don't fall for those cute faces, 5 Rs for cleaning the room, so be it 5 only. Next ask them to write their goals, like what are they planning to buy from the money they get, at the end of the holidays. Guide them in developing their savings plan so that they can have enough money to fulfill their goal. You must continuously monitor their finances, and poke them if they are overspending. These activities are thrilling, kids will be motivated to work hard for more allowances and saving from their allowance since it is taking them closer to the their military gun, or a pair of skates, or whatever the goal is.

Make them your grocery shopping partners: Whenever you go for grocery shopping, take them along. Involve them in shopping, familiarize them with the information printed on the package and that it should be checked before buying the product, like MRP, expiry date, etc., let them check the price of each product you pick and also of the alternate products that you skip. They'll get an idea about the price of the products that are consumed in the house, the price difference between a Ferrero Rocher and a Dairy Milk chocolate, the effective cost of the product if you purchase combo packs, etc. At the end of the shopping, ask the kids to crosscheck the bill with the items purchased.

Keep them involved in the entire shopping process. This activity will give them practical exposure, it will teach them that things come for a price and will inculcate prudence from a young age.

Teach them entrepreneurial skills: Vacation is also an opportunity to let your kids taste business skills. The kids can set up a stall like a golgappa stall, or a sandwich stall, or a candle stall in any event that's happening around, like your society or a fete or a mall, etc. Let them do the purchase of the raw material, processing of the product, setting the price of the product, do sales, etc. The level of responsibility should depend upon the age of the kid. At the end of the day, if they manage to make a profit, it shall be deposited into their piggy bank or their saving account. This exercise will help them experience the thrill of business process, it'll be their first steps to learning business sense.

Money Games: There are a plethora of money games available for different age groups of kids in the market, on various subjects like stock exchange, piggy banks, business, saving, setting of goals and working towards them, etc. Kids have an appetite for games, a fun and engaging money game can be a good way to capture their interest and inculcate financial instinct among your young ones. You can research a bit and then buy few good money games for them in this vacation.

Gone are the days when kids were excluded from all financial discussions of the house, today parents make an effort to make their kids financially aware, so that when they enter into the mature world, they are not at point zero because the first thing they are going to face is money. So, this summer vacation, carve out some space for financial literacy from their activity schedule.

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Saving money is one of the most important part of ­financial management for individuals and families. Our spendings have a direct impact on our savings but unfortunately, controlling spendings is a challenge for everyone. Many of us believe that saving money is a methodical, disciplined and largely a left brain process. But it is not entirely true and saving money does need a lot of thinking and creativity.

The real challenge with most of us is to be able to think long term, plan for it and ­finally put enough efforts to achieve it. Therefore, the task of deciding how much to spend directly falls on the head of the spender. Here are a few well known tips on how to save more by controlling spendings...

1. KEEPING A BUDGET

Yes, the same old budgeting technique has gained much more prominence today where credit cards often encourage useless spending. Try budgeting for savings instead of spendings, for a fresh perspective. It will automatically force you to limit budget for spending. Hopefully, you may limit spendthrift activities and impulsive buys as the ­first step.

A creative idea for managing spendings is by maintaining a separate bank account for only spendings. Monthly you may transfer a fixed amount for planned spendings to this account from your income account. One part from our income account will go to savings as planned. This will automatically enforce discipline in managing budget.

2. PROCRASTINATION

Usually, procrastination is found to a useless and typically unproductive habit. But, used at the right place it can be as useful as the methodical thinking, and that right place is the time of spending. When running on the budget above, it’s easy to ­find yourself depleting that ‘spendings account’ before the month ends and then ­finding yourself in the fray with the products you really wanted to buy nowhere to be seen in the order list.

The trick is to procrastinate the use of ‘spendthrift account’ till the ­final days of the month and soon you’ll ­find that your savings are increasing at an increasing rate, and your order-list is full of necessary items you always wanted to buy. Procrastination is a good habit when it comes to spending on things which are not important or urgent.

3. PAY BILLS AUTOMATICALLY

There are wonderful features now a days on your online bank accounts that can help you save a lot of money you end up paying in penalties for late payments (because most of the time the bank account goes empty before the due date). Auto payment of the bills; i.e. postpaid phone bill, electricity and credit card bills, can save you from frequently paying those unnecessary penalties on late payments. Also, it’ll reduce your account balance in time, allowing you to spend only as much as you should and create another barrier to spending.

4. MANAGE CREDIT CARDS

Now we come to the hard part, credit cards you so dearly love and use, not just to buy the favorite weekend dinner or movie tickets, give wings to your spending, and if spending gets the wings they are sooner or later bound to go out of control. Therefore, you are left with two options with credit cards:

A You can pull your socks up and start managing your cards meticulously, or

B You can go ahead and switch to Debit cards. (yes, it means surrendering your credit card)

So, which one should you follow? Depends completely on your personality. If you feel that you are one of those people who love discipline, planning and are patient with money, you can easily manage your credit. On the other hand, if you like to call yourself creative, love living in the moment and being spontaneous, credit cards are perhaps not a useful choice for you (though, there can be exceptions).

This step is important, because your credit card can easily make or break your credit score. Credit cards are best and perhaps the easiest way to build a good credit score, all you need to do is take care of the following:

• Have a total credit limit no exceeding your annual income on all your credit cards combined,

• Use only up to 70 - 75% of the total credit limit in any billing period, Ensure that you are always able to pay in time, and

• Ensure the amount spend is always paid in full in the same billing period.

This may sound tough for the right brainers though, and if it does you may follow the tricks given below and still manage to keep a credit card.

• Spend only as much you can repay at the end of the billing period.

• Tally the credit card transactions and your bank balance regularly. Check past records to see how much you can actually spend through credit card.

• To save miscalculations switch to bill payments for phone and electricity through credit card.

5. LET SOMEONE ELSE DECIDE

This may sound strange but, it is a very useful and stress-free method of making your spending decision. There is one limitation however, you cannot bank on the stranger for each and every small expenditure, and neither would you like the control the stranger may exercise on your expenses. The way to solicit the stranger’s help in controlling your expenses is to get a comprehensive plan and let the stranger tell you how much you can spend in each of the months. That stranger, will usually be your ­financial planner or wealth manager, and will provide you a comprehensive roadmap for not just future but also the present. Knowing what is important and what is not, setting your priorities based on factual data and numbers and not on feelings and impulses will certainly allow you to achieve the self-discipline needed to control the spending.

OTHER INTERESTING METHODS

If somehow you find accepting and applying any of the methods above, yet you still want to be able to control your spending there are more interesting and rejuvenating ways to do that:

A] Spend time prioritizing & planning: A weekend exercise each month or every two months will take you long way towards family bonding and spending your money in far more useful and satisfactory manner.

B] Think Long Term: Long term success requires short term sacrifice and the same is true for money as well. If you have bigger long term goals spending control in the short term is very important.

C] Use SIP Mode: SIP mode of investment, or Systematic Investment Plans can be useful in diverting your money towards savings each month before you can think of spending it. Plus, you have added advantage of performance if you are investing in Equity Mutual Funds.

D] Use Your Recording Skills: No need to be surprised here, recording skills mean recording transactions not the video recording skills. All you need is a notepad on your smart phone or a small notebook and a pen at the end of the day and less than 5 minutes of time to record every expenditure you incurred throughout the day. Best way is to use a spreadsheet on your cell phone or laptop, where you can enter the bank balance at the top (in negative) and then record the spending every day with a total being displayed at the bottom. This, will keep telling you about how close you are to the limit you have set for your expenses. Additionally, if you want to get creative, spreadsheets can be wonderful in reflecting your income-expense status. You may add pie charts (see ­gure: “Spending Chart”) and actually use the data to tally with your bank statement, giving you a comprehensive picture of where your money goes and where you can control its ow.

E] Make a List: Prepare a ‘Go Get It’ list before you go out to shop. It is an old but powerful tool to get hold of your purse each time you get attracted to a new arrival at the superstore, or the new advertisement for the same old non-useful product you already own. With these many weapons at your disposal, it shall be easy for you to conquer the spending territory. Additionally, you can try finding your very own creative ways to control your spending and credit yourself with successfully defending your money later.

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"The biggest risk is not taking any risk.. In a world that's changing really quickly, the only strategy that is guaranteed to fail is not taking risks." - Mark Zuckerberg, Facebook

In order to grow, we need to take risks, in businesses and in our careers, we need to walk up the hill to see what's lying ahead, we need to explore ourselves to find our true strength. Before we take the risk of shifting from Content Department to Sales Department of our organization, how do we come to know what are we really good at. Risk and return go hand in hand, you want to become rich, you must take the necessary risks. Among the two major financial asset classes, Equity and Debt, Equity is generally associated with risk and Debt with safe and steady returns. Indian investors have been playing too safe with their investments, our investments are dominated by Debt, our portfolios are largely concentrated with FD's, PPF, RD's, traditional insurance policies (since we get a fixed amount on maturity), Post Office Schemes, etc. Even young investors in the early stages of their careers aren't assuming any risk.

As highlighted earlier, there is a direct correlation between Risk and Return. The problem with being too conservative is it leads to sub optimal returns over the long term, which is not a sustainable approach for realizing long term goals.

Many investors religiously invest in PPF for their Retirement. Let's understand the Risk Return paradox through an example in this direction. Let's say an investor (aged 35) invests Rs 10,000 every month in PPF for his Retirement goal. This guy would get Rs 91.48 Lacs when he retires (when he'll be 60). Had he invested in a product with a better return potential like an Equity Mutual Fund, if he would have been SIPing this Rs 10,000 in a diversified equity fund, he would have got Rs 1.7 Crores when he retires. And Rs. 1.7 Crores looks way more reasonable to fund ones post retirement life, (which may stretch upto 30 years) as compared to Rs 91.48 Lacs. An extra 4% return could have funded another decade of this investor's retirement.

On the other extreme end, there are some investors who understand the paradox and take supernormal risks to get extraordinary returns. There are investors who do commodity, future trading, intra-day trading, etc., but these are the ones who lose the most money.

So, the question that arises here is, how much risk should you take?

The risk you should take is dependent upon a number of factors, viz.

• Your financial position: income, expenses, assets, liabilities;
• Family responsibilities;
• Your age;
• The time you have in hand for your goal to arrive, etc.

However, the risk quotient is always subjective, it varies from case to case. The Risk should be in conjunction with the returns you need. The real risk arises when the value of your investment is less than the value of your goal, what happens in between doesn't matter in the end.

The Golden Rule is Young Investors should take more Risk and the Old Ones should take less risk. But what if the retirement FD of the old investor is not enough to last him for the next 20 or 30 years. Will it be prudent for the investor to continue invested in the 8% FD providing safe and stable returns? Probably No. He needs better returns from his retirement corpus, to provide for his expenses till he's alive. For this, he must expose his corpus to some risk, to earn the return he requires to survive.

The bottomline is, if there is a difference between your risk appetite and the risk you require, you need to bridge the gap. Sometimes, it is ideal to take risk even at 60. We must understand that in order to create wealth/have the required money to actualize our dreams, we must take the necessary risk. Great things never come from being in your Comfort zone, because in the end, we only regret the chances we didn't take earlier.

So, are you taking enough risk?

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