Steps for Reporting Identity Theft

steps after identity theftYour wallet contains some of your most important personal items, from hard-earned money to credit cards and driver’s license. For an identity thief, your wallet offers a treasure trove of personal information. If your wallet is lost or stolen: If you suspect or become a victim of identity theft, follow these steps:

  • Report it to your financial institution. Call the phone number on your account statement or on the back of your credit or debit card.
  • Report the fraud to your local police immediately. Keep a copy of the police report, which will make it easier to prove your case to creditors and retailers.
  • Contact the credit-reporting bureaus and ask them to flag your account with a fraud alert, which asks merchants not to grant new credit without your approval.

If your identity has been stolen, you can use an ID Theft affidavit to report the theft to most of the parties involved. All three credit bureaus and many major creditors have agreed to accept the affidavit. You can download the ID theft affidavit or request a copy by calling toll-free 1-877-ID-THEFT (438-4338). You can also use this website to file a complaint with the FTC.

Use this helpful infographic (PDF file) to help you remember the steps to take if your wallet or identity have been stolen.

11 Tips for Preventing Identity Theft

Identity thieves steal your personal information to commit fraud. They can damage your credit status and cost you time and money restoring your good name. To reduce your risk of becoming a victim, follow the tips below:

  1. Don’t carry your Social Security card in your wallet or write it on your checks. Only give out your SSN when absolutely necessary.
  2. Protect your PIN. Never write a PIN on a credit/debit card or on a slip of paper kept in your wallet.
  3. Watch out for “shoulder surfers”. Use your free hand to shield the keypad when using pay phones and ATMs.
  4. Collect mail promptly. Ask the post office to put your mail on hold when you are away from home for more than a day or two.
  5. Pay attention to your billing cycles. If bills or financial statements are late, contact the sender.
  6. Keep your receipts. Ask for carbons and incorrect charge slips as well. Promptly compare receipts with account statements. Watch for unauthorized transactions.
  7. Tear up or shred unwanted receipts, credit offers, account statements, expired cards, etc., to prevent dumpster divers getting your personal information.
  8. Store personal information in a safe place at home and at work. Don’t leave it lying around.
  9. Don’t respond to unsolicited requests for personal information in the mail, over the phone or online.
  10. Install firewalls and virus-detection software on your home computer.
  11. Check your credit report once a year. Check it more frequently if you suspect someone has gotten access to your account information.

Some Fun Facts About Money

  • The Bureau of Engraving and Printing produces 26 million notes a day, with a face value of approximately $907 million.
  • Over 90 percent of U.S. currency is Federal Reserve notes.
  • A stack of currency one-mile high would contain more than 14.5 million notes.
  • Currency is actually fabric composed of 25 percent linen and 75 percent cotton.  Currency paper has tiny red and blue synthetic fibers of various lengths evenly distributed through out the paper.
  • The $2 bill first originated on June 25, 1776, when the Continental Congress authorized issuance of the $2 denominations in “bills of credit for the defense of America.”
  • The first dollar coin was issued in 1782.
  • The dollar was officially adopted as our nation’s unit of currency in 1785.
  • The largest bill ever printed by the Bureau of Engraving and Printing was the $100,000 gold certificate.
  • The U.S. Secret Service was created during the Civil War to fight counterfeiting.
  • The motto “In God We Trust” did not appear on paper currency until 1963.
  • The Bureau of Engraving and Printing has two facilities, one in Washington, D.C. and the other in Fort Worth, Texas.  Together they use approximately 9.7 tons of ink per day.
  • The approximate weight of a bill is one gram.  Since there are 454 grams in one pound, there are 454 notes in one pound.
  • The largest note produced today is the $100 bill.
  • It costs approximately 6.4 cents per note to produce U.S. currency.
  • About 45 percent of the notes printed each year are $1, and 95 percent are used as replacement notes.
  • About 4,000 double folds (forward and backward) are required before a note will tear.
  • The average life of a Federal Reserve note depends upon its denomination:
    $1 bill – 21 months
    $5 bill – 16 months
    $10 bill – 18 months
    $20 bill – 2 years
    $50 bill – 4.5 years
    $100 bill – 7.5 years

How Do I Calculate Finance Charges?

Having some knowledge of how to calculate finance charges is always a good thing. Most lenders, as you know, will do this for you, but it can helpful to be able to check the math yourself. It is important, however, to understand that what is presented here is a basic procedure for calculating finance charges and your lender may be using a more complicated method. There may also be other issues attached with your loan which may affect the charges.

The first thing to understand is that there are two basic parts to a loan. The first issue is called the principal. This is the amount of money that is borrowed. The lender wants to make a profit for his services (lending you the money) and this is called interest. There are many types of interest from simple to variable. This article will examine simple interest calculations.

In simple interest deals, the amount of the interest (expressed as a percentage) does not change over the life of the loan. This is often called flat rate or fixed interest.

The simple interest formula is as follows:

Interest = Principal × Rate × Time

Interest is the total amount of interest paid.

Principal is the amount lent or borrowed.

Rate is the percentage of the principal charged as interest each year.

To do your math, the rate must be expressed as a decimal, so percentages must be divided by 100. For example, if the rate is 18%, then use 18/100 or 0.18 in the formula.

Time is the time in years of the loan.

The simple interest formula is often abbreviated:

I = P R T

Simple interest math problems can be used for borrowing or for lending. The same formulas are used in both cases.

When money is borrowed, the total amount to be paid back equals the principal borrowed plus the interest charge:

Total repayments = principal + interest

Usually the money is paid back in regular installments, either monthly or weekly. To calculate the regular payment amount, you divide the total amount to be repaid by the number of months (or weeks) of the loan.

To convert the loan period, ‘T’, from years to months, you multiply it by 12. To convert ‘T’ to weeks, you multiply by 52, since there are 52 weeks in a year.

Here is an example problem to illustrate how this works.

Example:

A single mother purchases a used car by obtaining a simple interest loan. The car costs $1500, and the interest rate that she is being charged on the loan is 12%. The car loan is to be paid back in weekly installments over a period of 2 years. Here is how you answer these questions:

1. What is the amount of interest paid over the 2 years?

2. What is the total amount to be paid back?

3. What is the weekly payment amount?

You were given: principal: ‘P’ = $1500, interest rate: ‘R’ = 12% = 0.12, repayment time: ‘T’ = 2 years.

Step 1: Find the amount of interest paid.

Interest: ‘I’ = PRT

= 1500 × 0.12 × 2

= $360

Step 2: Find the total amount to be paid back.

Total repayments = principal + interest

= $1500 + $360

= $1860

Step 3: Calculate the weekly payment amount.

Weekly payment amount = total repayments divided by loan period, T, in weeks. In this case, $1860 divided by 104 weeks equals $17.88 per week.

Calculating simple finance charges is easy once you have done some practice with the formulas.

Source: http://www.articlesbase.com/finance-articles/how-do-i-calculate-finance-charges-218237.html

Author

Peter Kenny is a writer for The Thrifty Scot, please visit us at Unsecured Loans and Bank Charges

Bankruptcy Basics | Process

bankruptcyArticle I, Section 8, of the United States Constitution authorizes Congress to enact “uniform Laws on the subject of Bankruptcies.” Under this grant of authority, Congress enacted the “Bankruptcy Code” in 1978. The Bankruptcy Code, which is codified as title 11 of the United States Code, has been amended several times since its enactment. It is the uniform federal law that governs all bankruptcy cases.

The procedural aspects of the bankruptcy process are governed by the Federal Rules of Bankruptcy Procedure (often called the “Bankruptcy Rules”) and local rules of each bankruptcy court. The Bankruptcy Rules contain a set of official forms for use in bankruptcy cases. The Bankruptcy Code and Bankruptcy Rules (and local rules) set forth the formal legal procedures for dealing with the debt problems of individuals and businesses.

There is a bankruptcy court for each judicial district in the country. Each state has one or more districts. There are 90 bankruptcy districts across the country. The bankruptcy courts generally have their own clerk’s offices.

The court official with decision-making power over federal bankruptcy cases is the United States bankruptcy judge, a judicial officer of the United States district court. The bankruptcy judge may decide any matter connected with a bankruptcy case, such as eligibility to file or whether a debtor should receive a discharge of debts. Much of the bankruptcy process is administrative, however, and is conducted away from the courthouse. In cases under chapters 7, 12, or 13, and sometimes in chapter 11 cases, this administrative process is carried out by a trustee who is appointed to oversee the case.

A debtor’s involvement with the bankruptcy judge is usually very limited. A typical chapter 7 debtor will not appear in court and will not see the bankruptcy judge unless an objection is raised in the case. A chapter 13 debtor may only have to appear before the bankruptcy judge at a plan confirmation hearing. Usually, the only formal proceeding at which a debtor must appear is the meeting of creditors, which is usually held at the offices of the U.S. trustee. This meeting is informally called a “341 meeting” because section 341 of the Bankruptcy Code requires that the debtor attend this meeting so that creditors can question the debtor about debts and property.

A fundamental goal of the federal bankruptcy laws enacted by Congress is to give debtors a financial “fresh start” from burdensome debts. The Supreme Court made this point about the purpose of the bankruptcy law in a 1934 decision:

[I]t gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.
Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934). This goal is accomplished through the bankruptcy discharge, which releases debtors from personal liability from specific debts and prohibits creditors from ever taking any action against the debtor to collect those debts. This publication describes the bankruptcy discharge in a question and answer format, discussing the timing of the discharge, the scope of the discharge (what debts are discharged and what debts are not discharged), objections to discharge, and revocation of the discharge. It also describes what a debtor can do if a creditor attempts to collect a discharged debt after the bankruptcy case is concluded.

Six basic types of bankruptcy cases are provided for under the Bankruptcy Code, each of which is discussed in this publication. The cases are traditionally given the names of the chapters that describe them.

Chapter 7, entitled Liquidation, contemplates an orderly, court-supervised procedure by which a trustee takes over the assets of the debtor’s estate, reduces them to cash, and makes distributions to creditors, subject to the debtor’s right to retain certain exempt property and the rights of secured creditors. Because there is usually little or no nonexempt property in most chapter 7 cases, there may not be an actual liquidation of the debtor’s assets. These cases are called “no-asset cases.” A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In most chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the petition is filed. Amendments to the Bankruptcy Code enacted in to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 require the application of a “means test” to determine whether individual consumer debtors qualify for relief under chapter 7. If such a debtor’s income is in excess of certain thresholds, the debtor may not be eligible for chapter 7 relief.

Chapter 9, entitled Adjustment of Debts of a Municipality, provides essentially for reorganization, much like a reorganization under chapter 11. Only a “municipality” may file under chapter 9, which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts.

Chapter 11, entitled Reorganization, ordinarily is used by commercial enterprises that desire to continue operating a business and repay creditors concurrently through a court-approved plan of reorganization. The chapter 11 debtor usually has the exclusive right to file a plan of reorganization for the first 120 days after it files the case and must provide creditors with a disclosure statement containing information adequate to enable creditors to evaluate the plan. The court ultimately approves (confirms) or disapproves the plan of reorganization. Under the confirmed plan, the debtor can reduce its debts by repaying a portion of its obligations and discharging others. The debtor can also terminate burdensome contracts and leases, recover assets, and rescale its operations in order to return to profitability. Under chapter 11, the debtor normally goes through a period of consolidation and emerges with a reduced debt load and a reorganized business.

Chapter 12, entitled Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income, provides debt relief to family farmers and fishermen with regular income. The process under chapter 12 is very similar to that of chapter 13, under which the debtor proposes a plan to repay debts over a period of time – no more than three years unless the court approves a longer period, not exceeding five years. There is also a trustee in every chapter 12 case whose duties are very similar to those of a chapter 13 trustee. The chapter 12 trustee’s disbursement of payments to creditors under a confirmed plan parallels the procedure under chapter 13. Chapter 12 allows a family farmer or fisherman to continue to operate the business while the plan is being carried out.

Chapter 13, entitled Adjustment of Debts of an Individual With Regular Income, is designed for an individual debtor who has a regular source of income. Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house, and because it allows the debtor to propose a “plan” to repay creditors over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief under the means test. At a confirmation hearing, the court either approves or disapproves the debtor’s repayment plan, depending on whether it meets the Bankruptcy Code’s requirements for confirmation. Chapter 13 is very different from chapter 7 since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor’s anticipated income over the life of the plan. Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor actions while the plan is in effect. The discharge is also somewhat broader (i.e., more debts are eliminated) under chapter 13 than the discharge under chapter 7.

The purpose of Chapter 15, entitled Ancillary and Other Cross-Border Cases, is to provide an effective mechanism for dealing with cases of cross-border insolvency. This publication discusses the applicability of Chapter 15 where a debtor or its property is subject to the laws of the United States and one or more foreign countries.

In addition to the basic types of bankruptcy cases, Bankruptcy Basics provides an overview of the Servicemembers’ Civil Relief Act, which, among other things, provides protection to members of the military against the entry of default judgments and gives the court the ability to stay proceedings against military debtors.

This publication also contains a description of liquidation proceedings under the Securities Investor Protection Act (“SIPA”). Although the Bankruptcy Code provides for a stockbroker liquidation proceeding, it is far more likely that a failing brokerage firm will find itself involved in a SIPA proceeding. The purpose of SIPA is to return to investors securities and cash left with failed brokerages. Since being established by Congress in 1970, the Securities Investor Protection Corporation has protected investors who deposit stocks and bonds with brokerage firms by ensuring that every customer’s property is protected, up to $500,000 per customer.

The bankruptcy process is complex and relies on legal concepts like the “automatic stay,” “discharge,” “exemptions,” and “assume.” Therefore, the final chapter of this publication is a glossary of Bankruptcy Terminology which explains, in layman’s terms, most of the legal concepts that apply in cases filed under the Bankruptcy Code.

Compare Investment Vehicles

compareNot all investment vehicles are created equal or work for your personal financial goals. Some provide steady income and are low risk, but yield small returns on investment; others may provide significant returns, but require a long term investment commitment. There is a wide assortment of investment vehicles available. Some of the most popular include: mutual funds, traditional IRAs, Roth IRAs, savings bonds or bond funds, stocks, and certificates of deposit.

Some investments pay out earnings on a regular (quarterly, monthly, or annual) basis, while others pay out earnings at the end of the investment period or may have age requirements for when you can withdraw your money without a penalty. Make sure your investment income stream matches your investment timeline.

You should also consider the tax ramifications. If you are saving for retirement or for education, consider investments that offer incentives for saving for a particular purpose. Your contributions for some investments are tax deductible, but the earnings are not taxed (e.g. Roth IRA); your contributions to other investments may not be taxed, but the earnings are taxed (e.g. traditional IRA).

You don’t have to put all of your money in one investment. Consider diversifying your investment portfolio by placing your money in several investment vehicles. This can protect you from risk; while one of your investments may be performing poorly, another one of your investments can make up for those losses.

Type of Investment What is it? Risk level
Traditional IRA Traditional IRA is a personal savings plan that gives tax advantages for savings for retirement. Investments may include variety of securities. Contributions may be tax-deductible; earnings are not taxed until distributed. Risk levels vary according to the holdings in the IRA
Roth IRA A personal savings plan where earnings that remain in the account are not taxed. Investments may include a variety of securities. Contributions are not tax-deductible. Risk levels vary according to the holding in the IRA
Money Market Funds Mutual funds that invest in short-term bonds. Usually pays better interest rates than a savings account but not as much as a certificate of deposit (CD). Low risk.
Bonds and Bond Funds Also known as fixed-income securities because the income they pay is fixed when the bond is sold. Bonds and bond funds invest in corporate or government debt obligations. Low risk.
Index Funds Invest in a particular market index. An index fund is passively managed and simply mirrors the performance of the designated stock or bond index. Risk level depends on which index the fund uses. A bond index fund involves a lower risk level than an index fund of emerging markets overseas.
Stocks Stocks represent a share of a company As the company’s value rises or falls, so does the value of the stock. Medium to high risk.
Mutual funds Invest in a variety of securities, which may include stocks, bonds, and/or money market securities. Costs and objectives vary. Risk levels vary according to the holdings in the mutual fund.

Investigate Before You Invest

investigateWhat do you want to invest in: stocks, bonds, mutual funds? Do you want to open an IRA or buy an annuity? Does your employer offer a 401K? Remember, every investment involves some degree of risk. Most securities are not insured by the Federal government if they lose money or fail, even if you purchase them through a bank or credit union that offers Federally insured savings accounts. Make sure you have answers to all of these questions before you invest:

  • Define your goals. Ask yourself “Why am I investing money?” Maybe you want to save money to purchase a house or to save for retirement. Maybe you would like to have money to pay for your child’s education, or just to have a financial cushion to handle unexpected expenses or a loss of income.
  • How quickly can you get your money back? Stocks, bonds, and shares in mutual funds can usually be sold at any time, but there is no guarantee you will get back all the money you paid for them. Other investments, such as limited partnerships, often restrict your ability to cash out your holdings.
  • What can you expect to earn on your money? While bonds generally promise a fixed return, earnings on most other securities go up and down with market changes. Also, keep in mind that just because an investment has done well in the past, there is no guarantee it will do well in the future.
  • What type of earnings can you expect? Will you get income in the form of interest, dividends or rent? Some investments, such as stocks and real estate, have the potential for earnings and growth in value. What is the potential for earnings over time?
  • How much risk is involved? With any investment, there is always the risk that you won’t get your money back or the earnings promised. There is usually a trade-off between risk and reward: the higher the potential return, the greater the risk. The federal government insures bank savings accounts and backs up U.S. Treasury securities (including savings bonds). Other investment options are not protected.
  • Are your investments diversified? Some investments perform better than others in certain situations. For example, when interest rates go up, bond prices tend to go down. One industry may struggle while another prospers. Putting your money in a variety of investment options can help to reduce your risk.
  • Are there any tax advantages to a particular investment? U.S. Savings Bonds are exempt from state and local taxes. Municipal bonds are exempt from federal income tax and, sometimes, state income tax as well. For special goals, such as paying for college and retirement, tax-deferred investments are available that let you postpone or even eliminate payment of income taxes.

10 smart ways to avoid investments fraud

  • fraudAlways Deal with certified financial planner.
  • Always check the identity card of the person to whom you’re dealing with. Check the company name & date of validity of the card.
  • Do not blindly trust any one even if you know him / her from several years. Always ask for official brochure of the product you’re dealing with & see everything written there.
  • Always use your own pen while filling application form and/or cheques. The era of frauds using invisible ink of agents has just begun.
  • Always write application no., your name, mobile phone no. at the back of the cheque. If you’re giving renewal premium cheque, write your policy no. also.
  • Ask for official illustration of the insurance product or fact sheet of mutual fund before investing.
  • Ask your advisor to show the comparison with other competitive products. You may like some feature of other product which your advisor does not like.
  • Note down the your agent / distributor full contact details before submitting application forms like full name, license no., branch address & phone no., residential address & phone no. – mobile phone & landline, email address etc.
  • Always put the date below your signature, where ever you sign.
  • When you get your policy bond / statement of account, check all the details 
    like your name, contact details, nominee name & other things. Go through all the documents. Pay attention to the charges portion carefully. The company gives photocopy of your filled application form along with your signed official illustration with policy bond.
  • Check for renewal date & payment frequency carefully in your policy bond. It has come to notice that several agents had taken the cheque from customers for yearly mode or half-yearly mode & has submitted the documents on monthly mode.

Fired from job?

Being fired from a salaried job is new phenomenon in India. Till a few years ago, a salaried job with even a mid-size firm was for lifetime unless the employee quits to pursue greener pastures. Things have changed dramatically with the advent of the service-oriented jobs in the so-called new economy and the Indian economy hinged to the vagaries of the global market. Now a professional faces the prospect of a short-term break in his/her carrier due to challenging economic environments such as the current volatility in the world economy. While one cannot do much to avoid a job loss other than working hard, a well laid out financial planning may go a long way in mitigating its impact.


Not long ago, the salaried class in India had been used a benign job market and near permanency of jobs. The picture, however, has changed over the past 10 years given the increasing number of job opportunities in areas of IT and IT-enabled services like call centers, BPO, and KPO, and other sectors such as media and entertainment, aviation and hospitality.

Go for a financial planning

For instance, during the economic slump of 2008-09, companies, mainly in export related businesses, had to reconfigure their workforce to address the falling demand from the US and European markets. This pushed a portion of their headcount into a temporary jobless phase. The situation was similar in the fields of financial research and investment banking, print and electronic media and gems and jewellery.

No doubt, the present day employment is following the crests and troughs of global business cycles more closely than before. This makes it necessary to plan for such an adversity well in advance. According to the financial planning experts, the opportune time is now. As Swapnil Pawar, head – high net worth individual (HNI) solutions, Karvy Private Wealth, says: “Disciplined investment and savings pattern from the start of a person’s working life is key to building financial security, and to ensure adequate funds during the loss of employment.”

What's your budget?

During the loss of employment, a person needs to quickly adjust to a different set of challenges. While the regular inflow of money in the form of salary disappears, many of the essential expenses, such as monthly rent or interest on home loans, insurance premium, food and laundry expenses, medical expenses, etc will still remain.

To get an exact sense of such expenses, one needs to draw up a budget, mapping the current monthly income and expenditure. This should include any type of loan servicing and credit card payments along with the available income streams, such as spouse’s income, fixed deposit interest and dividend income, if any. Also, don’t forget to include liquid assets such as bank savings and current account and liquid fund schemes of mutual funds. This leads to the next step of generating what financial planners call a contingency fund. Such a fund is crucial in meeting day-to day expenditure and other financial emergencies during the time of difficulty.

The power of contingency fund

Typically, the size of the contingency fund should be adequate to meet 3-6 months of a family’s monthly expenditure, including loan payments. In some professions, which are highly specialized, and it is comparatively difficult to find an alternative employment quickly, financial planners argue for a 9-month contingency fund.

While building the contingency fund, one can start by setting aside nearly 10-15% of the family’s monthly income, in low risk instruments like bank term deposits and liquid fund schemes of mutual funds. Remember, this contingency fund requirement is dynamic.

It needs to be reviewed each year to adjust for a possible increase in a family’s income or expenditure pattern, or the enlargement of a family due to the birth of a child. For instance, if a family currently spends Rs 50,000 per month, they would need a contingency fund, that could vary between Rs 150,000 – 300,000. However, if two years later their monthly expenditure reaches Rs 65, 000 due to a bigger family, the contingency fund would need to be a minimum of Rs 200,000.

 

Use severance pay judiciously

A laid off employee in the organised sector typically receives 3-6 months of severance pay. In absence of a contingency fund, such a windfall cash flow would find its use in meeting day-to-day expenses. Experts warn against such uses of severance package.

Financial planners say that if proper financial planning has been done from the beginning, the severance pay could be utilised to reduce outstanding loans, such as car or credit card loan. This will take away some burden from the monthly family budget since these loans typically have a higher rate of interest than a secured loan, like housing.

Be prudent when you spend

Young employees with lesser work experience may see their jobs vanishing faster than their experienced counterparts during a slowdown. Further, such relatively new employees may have lower contingency funds at disposal due to lesser number of years into service.

Hence, it becomes all the more important for such individuals to limit their credit driven expenses. Lesser the burden of personal loan, lower will be pressure on contingency funds during testing times. Says Kartik Jhaveri, a financial planner: “Conserving cash is key during such a difficult time. Individuals also need to eliminate unnecessary expenditure to balance their monthly budget.”

Seek help of your creditors

A senior executive at the country’s leading home loan company said that the lender should help the client jointly analyse his monthly cash flows and various financial liabilities if he has lost his employment.

Based on this exercise, if possible, it advises the client to pre-pay more expensive debt including personal, car and credit card loans to reduce the burden on the monthly family budget.

Loss of employment is a difficult period for individuals but suitable financial planning in advance can help limit the impact.

Source: Economic Times

Teaching kids the ABC of finance

When it comes to teaching kids the ABC of finance, parents often find themselves walking a tightrope.

And why not, raising money smart kids is no mean feat, especially in today’s world where money doesn’t come easy.

Inculcating good money habits leading to financial independence is what all parents wish for their children. Here’s an account of captains of different industries on how they made their kids financially aware.

Ritesh Kumar, CEO, HDFC ERGO General Insurance

Learning to manage money is an important part of growing up for every child. Inculcating in the little one the habit of saving is perhaps something every parent tries to impart. The initial lesson in the journey to financial literacy starts with teaching them to put small savings into their piggy bank.

My kids got their exposure to banking when I would stop at an ATM and they would be with me, watching with astonishment the machine churning out currency notes. The lure to operate the ATM with a card of their own triggered the opening of their very own saving bank account.

Getting a personalised cheque book with their names printed on it gave them a huge thrill besides instilling a great sense of ownership. They would happily deposit their pocket money and any other money that they would get into this account. With banks building enough safeguards today such as limiting the amount that can be withdrawn from an ATM in the case of kids savings account greatly helps.

Awareness comes early today given the huge exposure to what they see around them and the televisionwhether it is catching glimpses of the stock price on the ticker as they surf through the channels or hear those catchy jingles like sar utha ke jiyo in ads between their favourite TV shows, their initiation into the fascinating world of financial products is much more than what our generation was exposed to when we were their age.

Sonal Dave, MD & COO, HSBC Securities & Capital Mkts

In the current highly competitive and dynamic environment we live in, developing financial literacy and responsibility among children cannot be over emphasised. It is desirable to introduce them to the basics of banking at a young age so they grow up to be financially responsible citizens making informed financial decisions.

This is the reason why we wanted to help our son Karan understand the core financial principles of earning, spending, saving and investing. It started in the early years through games such as Monopoly and later Life but the dayto-day practical cases were the ones that had a long-lasting impact.

Being from the banking world, it was possible to organise visits for him and his classmates in his early years to the bank to understand and see what happens backstage. To instill the habit of saving money, we opened his bank account when he was seven where his first deposit was the prize money that he had received—small in value but huge in learning.

As he grew older, we involved him in our discussions on our personal financials which helped him develop an appreciation for earning, responsible spending, tax planning , saving for contingencies and making sound investments. During the global financial downturn in 2008, we noticed that our efforts paid off as Karan was thinking and questioning the causes of the crises and offering preventive solutions.

Atika Khaneja, CEO, Collage Management

No one likes restriction of any kind. Yet the checks and balances are necessary because anything in natural form is prone to evil. That’s why I have structured a limit on the pocket money I give to my daughter. Money lessons are best learned at a young age. As a kid, she would often ask why she wasn’t given access to money.

This was the time we explained to her that money is earned the hard way and every penny should be spent carefully. When we got her an insurance policy, we made her go through the process. This ensured she starting talking about money.

She was eager to know what’s the purpose of buying insurance, how much money she will get after 25 years when the policy matures. She is now 16 and has a supplementary card linked to my account.

I keep on increasing and decreasing the spending limit so that she learns to manage under different circumstances. It also sends a message that the value of money never remains static.

Sulajja Firodia Motwani, MD, Kinetic

Whichever school of thought you belong to it is important that our children understand money, and its value . It’s equally important that they grow up with the right values about money. They must learn to earn with hardwork, learn to spend wisely, learn to save and learn to invest!

May be because my 9 year old son is a Marwari (me) and Sindhi (my husband ) lethal combo, he is very comfortable with commercial concepts!

He learned very early how to do “hisaab” when you go shopping, and learned that he wants to put “his” money in the piggy bank and spend “our” money!

Over the years, we have made an effort to imbibe into him, that one can do three things with money—spend it, save it or invest it and he loves that if you invest money, it grows! So he insists that all money he gets as gifts from his relatives must be invested!

Children should be taught concept of budgets

I have also found that we must teach our children concept of budgets. When we go shopping for toys, we tell him what his budget is and he gets quite involved in choosing toys or books up to the budget. He also remembers that he had underspent the budget of last shopping trip and gets it topped up! My friend who took Sid (my son) shopping for his birthday gift was amazed when he asked her what his budget for the gift was! This way they understand that spending is not unlimited.

Another useful experience is taking your child shopping at local store and teaching them how to compare prices of products and also how to evaluate price parity. One day, Sid and I went shopping for eggs and I picked up a pack of eggs which was nicely packed but was more expensive that another equal pack of eggs which as not having printed packaging. My son quickly pointed out that I am making a mistake and only paying for “advertising” !

I must add that I also once encouraged Sid to put up an exhibition of his art where he could display his work and sell it to family members and he loved the idea, but when I proposed the idea of donating the proceeds, he lost interest in the project! So I guess I still have to teach him the value of “giving” ! That’s next on my list!