10 things on new debit card PIN rule

Payment through cards has become increasingly popular in India. To maintain security and keep up with the changing times, the Reserve Bank of India has mandated debit card holders to punch in their PIN numbers during every transaction from December 1.

Here are some things you need to know about debit card usage:

1) The RBI rule was first enforced in June 2013 to act as an additional layer of security in transactions. However, banks had requested for some time to update the back-end infrastructure. The RBI had then extended the deadline to November 30.

2) As part of the rule, customers will now to have punch in the PIN number after the card has been swiped or inserted in the small point-of-sales (PoS) terminal. This is the small machine that shops and merchants use for the payment. Once the PIN has been entered, you will get the transaction charge slip, which has to be signed.

3) If the PoS terminal is not updated to ask for PIN, and the transaction proceeds without it, then the bank will decline the transaction.

4) The PIN being used here is the same that a customer uses at an ATM or Automated Teller Machine to withdraw money. Do not get confused with the ‘transaction password’ used for online banking.

5) You will get only three chances at punching the right PIN number. After that, your transaction will automatically be cancelled. If you manage to remember your PIN number after three attempts, you can still use your debit card. However, the transaction will have to be started all over again from scratch.

6) If you have forgotten your PIN number, call your bank to order for a duplicate PIN number. You will, however, have to verify your personal details like address, email id, date of birth, etc., for security purposes. This will be posted to your address within 7-10 working days.

7) This rule is mainly for debit cards being used for physical transactions only. There is no change in the way internet transactions are undertaken. The rules for credit cards too remain unchanged.

8) This is part of the measures undertaken to deal with frauds and security breaches. Other measures include addition of an Europay, MasterCard or Visa chip on the card, establishment of real-time fraud monitoring system, limit on transactions, immediate notifications, etc.

9) There are over 36 crore debit cards being used in India to conduct as many as 5.54 crore merchandise transactions per month amounting to Rs 8,017.86 crore. There are as many as 52 crore transactions being conducted using ATMs in a month, as per the latest RBI data.

10) In contrast, there are 1.8 million credit cards in use. The total number of transactions being conducted at PoS counters too is less at 4.14 crore. However, the total value of transactions is higher than that for debit cards at Rs 10,748 crore.

Source: Yahoo!

How To Advise A Couple Starting A Family

Starting a family is one of the most exciting and important decisions a couple is going to make together. Properly raising children can be a rewarding and challenging experience, and setting a financial plan regarding how to handle the added expense and save for the kids' future is an important component of a journey that will run two decades, or more. By recent estimates, it can cost at least $300,000 to raise a single child and put him or her through college. Below is a discussion of how this individual amount is calculated, as well as some of the more important financial considerations.

Saving for Education
College may be 18 or more years off for a couple that is planning to start a family, but it will take that long to make sure the savings are in place. For many years now the costs of attending a four-year university has increased at a pace that's well ahead of inflation. Money magazine recently estimated that the cost to attend an Ivy League school can average close to $40,000 per academic year, including tuition and living expenses. A private college can run around $30,000 annually, as can attending an out-of-state university. In-state college options are much more affordable at around $13,000 annually.

Add in a couple of children, and a couple will need at least $100,000 to pay for their children's college education. There are a couple of programs to help couples get ahead with savings. State 529 plans allow contributions to grow tax-free until the child attends college. Many states also have tax deductions for 529 contributions. Federal tax credits are currently available. These include the American Opportunity Tax Credit that allows a college tax break for families earning $160,000 or less.

Adjusting Your Budget for Additional Spending
There is little questioning that raising kids is going to be expensive. In addition to the need to save for college, there are additional healthcare and childcare options to consider. Bloomberg recently cited a Department of Agriculture report that estimated that it will cost nearly $227,000 to raise a single child to the age of 18. This means that college costs are additional but include the aforementioned childcare and healthcare costs, as well as transportation, which collectively make up the bulk of child-rearing expenses and it can get expensive. Food, clothing and shelter will also apply.

Again, there are programs and tax savings vehicles for families to take advantage of. Flexible spending accounts (FSAs) allow families to put away pre-tax dollars to pay for doctor co-pay payments as well as many other applicable health-spending needs. Children usually require standard check-ups and are going to be sick more often as they build-up their immune systems, so a FSA will easily pay for itself. Also, federal child and dependent care tax deductions exist and can allow deductions for as high as $6,000 annually.

Estate Planning
Having a financial plan means planning for the long haul, and though thinking through estate planning and the inheritance that your children will receive many decades forward may not seem needed, it is important to get the process going from day one. A rule of thumb, according to Warren Buffett, is to leave your children with enough assets to do something, but not enough to do nothing. This means that parents should consider leaving sufficient assets for their children to live comfortably and have enough savings for a rainy day, but don't leave too much where they no longer have a need to work and potentially grow lazy in their old age.

Families blessed with excess savings levels will want to consider how to minimize inheritance and estate taxes. Individuals are currently allowed to gift $13,000 without incurring taxes, which means that a couple with more than one child can give $26,000 to each child annually. Starting young could mean nearly half a million dollars is transferred to the child by the time he or she turns 18. Trusts are also viable options for wealthier families.

For instance, a generation skipping trust will provide a benefit for your children's children but also for your children while they are alive. It currently allows for around $2 million that can bypass estate taxes and leave a comfortable nest egg for future generations that can minimize taxes that can go to the government.

The Bottom LineWhen it comes to important tax and other deductions that can help a couple save to start a family, it is important to talk with a personal financial advisor or accountant. The tax code is very complex, and unique personal situations need to be considered to make sure that couples qualify for the number of benefits that exist. An equally important topic, not discussed above, is to also teach your kids about saving and spending responsibly. As they get older, it can help the parents save but can also prepare the children for when they are on their own and eventually raise their own families. There are, of course, cheap and expensive options for raising children. Returning to the Department of Agriculture study, costs can range from $163,000 to $377,000 for the first 18 years of life, depending on income levels, tax deductions sought and just how much parents are able to save from their salaries for their children.

Source: Yahoo!

Why starting to save early makes sense

You are probably among the many young people who have left their parents' home in pursuit of a career, a better pay cheque, power, fame or simply to find yourself. As easy as it may sound, living alone has a lot more responsibilities than you can think of. Tasks like house hunting, paying rent on time, managing daily expenses, watching movies, traveling to work, spending on food and after all this sending some money back home, can take a toll on your finances. But with the higher disposable income this has become increasingly rampant. Saving or Investing is a thing that is far-fetched. When we’re young, we just want to spend the money, but think how much you are taking away from your future self. So start saving for your goals and plan up early

Seeing is believing, here’s an example –

Starting Age of investment	25 years	30 years
Monthly Contribution	10,000	10,000
No of years for investment	35	30
Total Contribution	4,200,000	3,600,000
Rate of Returns	12%	12%
Value at maturity	64,309,595	34,949,641

If we look at the above calculation, we can easily make out that the contribution of Rs. 6 lakh done in first five years actually gives boost to your overall wealth. The difference of wealth creation is close to 46%.  

How to save without compromising on luxuries?

As a new investor, you should start a contribution of atleast 10%- 20% of your salary towards savings. You can start with investment in mutual funds through Systematic Investment Plan (SIP) which allow you to invest into market with moderate amount of risk. SIP also helps you to invest on regular basis. Systematic and disciplined approach to investment can lead to wealth creation.

In the early stages of your career, you can also take high risk as there is no financial or social responsibility on you. You can take aggressive investment approach and start investing into some mid cap funds or equity shares also. However, indulge in them only if you have the required expertise.

During the first few years of your career you should also start accumulating some money for your immediate need or emergency needs. You should at least have 3 to 6 month salary as an emergency fund. Ideally you should park this money into liquid funds which offer better returns than a saving bank account and you can also get the money immediately (i.e. within 1 or 2 days).

Tax planning is also one crucial aspect for wealth creation exercise. In order to save tax, you can start with Equity Linked Saving Schemes (ELSS). ELSS gives you tax benefit under section 80C. This option has lock in of 3 years which makes you a long term investor.

Key Takeaway

Little drops of water fill the ocean. Your small monthly savings can help you to achieve your goal of wealth creation in big way. Consider the big picture. The decisions you make today about your career, education, debt and retirement will stick with you and shape your future. So, invest in yourself.

Source: Yahoo!

The teachings of Warren Buffet

What Warren Buffet says about basic investing, spending, savings are so true. Most of us know it, however too many of us do not live it.

If it does make a change in your life, thank HIM (I mean God) because this is common sense. WB said it once, I am just reproducing it.

1. On Earning:

Do not depend on a single income. Invest and create a second/ third source of income:

This means when you are young your first task should be saving and investing. By creating a second source of income you are quickly reducing your dependence on your job. This could help you to set out on your own one day. The quicker you can do it, the better.

2. On Spending:

If you buy things that you do not need, you may soon have to sell things you need: 

It kind of summarizes Gen X’s reaction towards ‘luxuries’. As a part of Gen X we were perhaps criticised for some of our expenses, so it could be a generational thing even for WB. However, having goals and knowing where you are going, and not spending just to ‘show off’ are important lessons for all generations.

3. On Savings:

Do not spend what is left after spending, instead spend after you save/invest:

Also called ‘Pay Yourself First’. If you realise that investing in a pension plan or for your kid’s education is just helping you to save more later on. It is not a sacrifice, it is just postponing consumption. So understand, invest and then spend.

4. On taking Risk:

Never test the depth of the river with both your feet: 

If you are doing something, do small. If you are a first gen investor, do not be carried away by equity lovers like me and put all your money in equity. Do a SIP with a small amount, and test the waters. Do a SIP of Rs. X (which could be 10% of your take home pay) for 5 years and then step up. And for heavens sake understand risk of inflation, and the concept of real returns

5. On Investing: 

Do not put all eggs in one basket:

Immaterial of who you are and how much you understand, create a portfolio. A full range lunch plate is always better than just one item. So create a portfolio with bonds, bond funds, PPF, NSC, equity, mutual funds, and on the risk side medical and term insurance.

6. On Expectation:

Honesty is expensive, do not expect it from cheap people:

Not everybody is honest, nor does everybody want to be honest. Honest advisers are difficult to find especially in Health and Wealth, be careful.

The author P V Subramanyam is a Chartered Accountant by qualification and a financial trainer by profession. Writing being a passion he also regularly pens his thought in his blog Subramoney

Source: Yahoo!

5 Ways to Avoid Getting Ripped Off at the Doctor's Office

Most of us can think of at least a few times when we took our car to the mechanic and got the sense they were trying to sell us services we didn't need, or worse yet, overcharging us for the ones we do receive. And most of us can't deny that we've felt a similarly nagging feeling from time to time while sitting on the doctor's examining table, or in the dentist's chair. But we don't like to believe our intuition. It's been ingrained that our doctor knows what's best for us, and that their services are required and worth the money we pay.
So when a special advisory medical panel met last April, they cited up to 45 overused medical tests and procedures that should be used less in doctors' offices and hospitals. From that extra set of x-rays that isn't needed, to pointless stress tests for perfectly healthy people, or certain questionable prescription medications, the recommendations from the American Board of Internal Medicine Foundation brought to light something we've hardly had the courage to express, but always wanted to: Sometimes we're just sick and tired of getting ripped off at the doctor's.
The costs are staggering: According to the Washington Post, A National Academy of Sciences report from 2005 found that 30 percent of U.S. healthcare spending was either unnecessary, wasteful, or both, and that some more recent studies revealed that the spending amounted to $600 billion to $700 billion annually.
Discussion forums across the Web are filled with complaints from people who criticize their dentist or primary care physician for trying to "up sell" them with products that are not only unneeded, but costly. According to Blisstree and other sources, when our doctor is insistent on giving us extra tests or exams, it's not to make more money, in fact, but to avoid a malpractice suit. Still, it's not much consolation when a dentist appears more eager to push their expensive tooth whitening package than to fill your painful cavity; or when a specialist insists on the most expensive prescriptions when a cheaper, over-the-counter alternative works just as well.
If you feel that you're paying more than you need to at the doctor, you can take control of your health (and the health of your savings account) by considering a few choices:
1. Seek out a second opinion.
Your dentist tells you that you need 10 cavities filled, seven root canals, and a new mouth of crowns--after insurance, it'll still cost you thousands of dollars. Yet another, separate dentist may find that all you need is some minimal dental work, saving you money, time, and physical discomfort.
The good news about healthcare is that you're not under contract or obligated to see just one doctor. If you're unhappy with the service you've received or price you've been quoted, it's perfectly acceptable to seek out another opinion from another doctor. Doctors are also required by law to forward your patient files or x-rays to other physicians. Don't feel guilty to shop around. Check with your insurance carrier--they'll be able to tell you which doctors in your network are board certified. Don't be afraid to refer to word-of-mouth websites like Yelp.com to see how some local specialists are rated. And when researching new physicians, see how much your co-payments will be stacked up against other doctors providing the same services.
2. Opt for medical schools and clinics.
Consider visiting a university dental or medical clinic for a checkup or exam. The cost is significantly cheaper and the care, very often, surpasses that of a regular medical practice. Most college clinic care is carried out by students under the supervision of a faculty M.D. Often, student doctors at specialty clinics, like those for chiropractic care or periodontal dental work, for example, have already received their full medical licensing.
Also consider visiting a low-cost medical clinic in your neighborhood. It's a cost-effective way of saving money while not skimping on the level of medical care you may need. It's a good option for the uninsured patient who can't afford to pay full cost, out of pocket, at a conventional medical practice.
3. Group exams and medical procedures together.
Say you've got three cavities that need filling, and you've scheduled three appointments for each--but you're unaware that there's a new co-payment for every visit. Now you may owe hundreds of dollars out of pocket. Work with your doctor or dentist to see their availability, and group major medical procedures into a plan that's physically, and financially, manageable for you. You can even do one better: If you're a prospective patient, schedule a consultation with the practitioner you've got in mind. Take a tour of their offices, ask about their rates, and see if you can receive an estimate of the services you may need. This can be an initial, low-cost way of diagnosing what kinds of medical services you may be in need of.
4. Avoid the up sell.
The Archives of Internal Medicine reported in 2011 that 40 percent of doctors polled, according to the L.A. Times, said that they ordered more tests and consultations than were necessary because they didn't get to spend enough time with their patients to make a proper diagnosis. Depending on your insurance plan, an extra test or three can come at a huge cost to you as the patient. If you're skeptical about a certain procedure, ask your doctor straight away if it's absolutely needed.
And like expensive cosmetics and other top-dollar products, which claim to perform better than their cheaper contemporaries, don't be swayed by a medical practitioner into buying pricey medicines or other items. Unless it's prescription, there's little reason to buy the tube of $30 toothpaste at the dentist's front counter when a generic $1.99 brand from the store works just as well. The same goes for prescriptions on everything from pain medication to back braces to contact lenses--your doctor may be able to prescribe you a generic brand at a savings to you.
5. Preventive care is the best medicine.
They say an ounce of prevention is worth a pound of cure. It can also be worth a lot to your finances, too. It goes without saying that eating right, exercising, and getting enough sleep keeps you healthy and prevents illness and disease. Some lifestyle changes may be all the treatment that's needed to avoid costly doctor visit or exams, even those that rightly justify a high price tag. The first step in avoiding a medical rip-off is to ensure that we're not just being honest with our choices we make in physicians and services, but the ones we make with our health.

Source: Yahoo!

5 Ways To Get Rich Online

To cash in online you need to be a game-changer. When Mark Zuckerberg launched Facebook, there was nothing like it. He is now worth $17.5 billion according to recent Forbes valuations. Drew Houston saw money to be made in online storage, and co-founded Dropbox, the web-based tool that hit $240 million in revenue in 2011. Eric Lefkofsky spotted the potential in Groupon and gave $1 million to CEO and founder Andrew Mason. This year, Lefkofsky made the Forbes Billionaires list with a net worth of $2.9 billion. There are still fortunes to be made online, and we have found a few ways to do so.
YouTube has launched the career of many a musician, including Justin Bieber, the teen pop sensation who earned $108 million in the past two years. But have you heard of Karmin, the pop duo who signed a million dollar record deal after their Chris Brown "Look At Me Now" cover went viral? The duo, real-life couple Amy Heidemann and Nick Noonan, hit it big when the video gained over 68 million views after its upload in April 2011, propelling Karmin to a million dollar deal with label heavyweight Epic Records just a month later. "Brokenhearted," the lead single from their debut album, has now gone platinum. [More from Forbes: 10 horrible reasons to get rich]
You do not have to be a singer to become a YouTube star. If you are lucky, you could shoot a video of your child, pet, or a double rainbow that strikes a chord and goes viral. YouTube might then get in touch asking you to become a partner, meaning the site will run ads along with your clip and share over 50% of the revenue with you. The father of "David After Dentist" has made more than $100,000 from YouTube ads alone. As well as advertising, viral video celebrities can diversify into TV appearances, merchandise and even iPhone apps, as the creator of "Charlie Bit My Finger" has done.
YouTube is not the only platform to launch the careers of millionaires. Sophia Amoruso, the founder of online clothing store Nasty Gal, started her business by selling vintage finds on eBay. After building a fan-base she outgrew the platform and created her own website. Nasty Gal is now worth $130 million, and is set to do $128 million in sales this year. [More from Forbes: Budget breaking discretionary spending]
These days, there are many more online retail options on which to cash in. Alongside the tried-and-tested web marketplaces of Craigslist and eBay are stylish sites like Threadflip, a place for sellers to turnaround their used women's apparel. ModCloth, which peddles vintage threads while carefully integrating social and mobile aspects has become increasingly popular, earning its 27-year-old husband-wife founders Eric and Susan Gregg Koger a spot on Forbes 30 Under 30 list.
Bloggers can make it big, too. First, you'll need to set up a site which will become your platform to write on music, fashion, finance or whatever your interest may be. Build a following and readership, and you could catch the attention of companies looking to acquire your site. In 2008, Johns Wu, the founder of Bankaholic.com, sold the site to Bankrate, Inc. for $14.9 million. Entrepreneurial tech site TechCrunch was acquired by AOL in 2010 for $30 million, making its founder, Michael Arrington, a wealthy man.
Fashion bloggers can also get rich. Just look at Leandra Medine, the woman behind the Man Repeller blog, whose site grew so popular it spawned two jewelry lines with Dannijo and a collaboration with Del Toro on $325 shoes. [More from Forbes: The 20 new rules of money]
Other ways to monetize your writing include selling affiliate marketing through programs such as Amazon Affiliates. Bloggers place an affiliate link for the product on their site, and whenever a visitor buys a product by clicking on that link, they will be credited with a sale and make a commission. Bloggers can also sell advertising space, earning higher rates for more visitors.

With a little creativity, you might just become the next Internet millionaire. So power up, log on, and start turning your talents into cash. [More from Forbes: 5 easy ways to fight the urge to splurge]

Source: Yahoo!

Airtel launches 4G services at Rs 999/month

Bharti Airtel, has launched India’s first 4G services in Kolkata today. Airtel , which had bagged BWA spectrum in four telecom circles -- Kolkata, Maharastra, Punjab and Karnataka -- for Rs.3,314.36 crore in 2010, selected Chinese telecom equipment maker ZTE to manage its services in Kolkata. The services are priced between Rs 999 per month to Rs 1999 per month for with a free quota of 6- 9 GB.

"High speed wireless broadband has the potential to transform India, provide a robust platform for building the country’s digital economy and truly empower people. With one of the largest pools of young population in the world, India will see massive growth in consumption of data and content over mobile devices and proliferation of mobile commerce. I look forward to Airtel playing a pivotal role in shaping this exciting future for India," Bharti Airtel, Chairman Sunil Mittal said.

Airtel plans to launch its 4G services in Bangalore within 30 days. Bharti and its rivals paid a total 385.43 billion rupees to buy fourth-generation (4G) wireless broadband spectrum in a 2010 government auction, which saw bids at much higher prices than initially expected.

What is 4G?

4G is short for Fourth (4th) Generation Technology  which is an extension on 3G  and 2G connection. What 4G technology will basically bring is high speed internet (upto 5 times faster than 3G). Compared to the existing 3G services that allow downloads speeds of up to 21 mbps (mega bytes per second), 4G allows download speeds of “upto 100 mbps’

This basically translates into high definition video streaming and instant photo and video downloads. It will also facilitate quicker uploads.

This move will help in bridging the digital divide and add to economic growth in rural areas by enhancing the reach of e-governance, e-health and e-education services. 

Source: Yahoo!

Do You Give Your Kids an Allowance?

How do your kids really learn to manage money? Do they learn about money at school? From their friends? By watching TV? By buying snacks from the corner shop after school hours to eat on the bus?
Probably all of these. But as with any other matter, a little knowledge can be a dangerous thing.

Most kids don't really learn to manage money, they learn to spend what they have and wait till they get more. Kids today, just like when we were kids ourselves, are more about instant gratification and less about planning for the future.
There's usually no practical money education at school, their friends might know about as much as they do and also this is not something children talk about, and if they try to learn by watching you things might seem complicated and they will simply become confused.

Common sense dictates that the younger they are when they start to learn, the more they will absorb and respect what you teach them. Kids today are growing up faster than you would believe. They develop wants and needs and financial lifestyles at a very young age.
By the age of 6, your friend's daughter will be asking for a cell phone and will want fun events at her birthday party to be better than events at her classmate's party. At age 8 your neighbour's son understands your computer better than you did at 16, and he wants a cell-phone and the Nintendo Wii too. While children may have financial needs, wants and demands, this is in fact the best age to help them understand money.

The 3 S's - Spending, Sharing, Saving
As a parent, you're going to take care of everything. School tuition fees, new clothes, shoes, books, food, shelter, presents... it's on you up to a certain age.
So what's the allowance for? What your child needs to learn is that the allowance is for 3 things: 

1. Spending: Personal items, snacks, toys, clothing items, entertainment
   
2. Sharing: Birthday presents for family members, friends, classmates, giving charity
   
3. Saving: For very special occasions or bigger purchases, your child can learn to start saving money a little in advance
   

And as your child gets older - we can add Investing to the list.

Money Education for a Child Aged 4 to 8

1. The main thing to do here is ensure your children can first identify money and are good at basic math money transactions. Help them know the difference between a Rs. 10 note and a Rs. 100 note, a Rs. 100 note and a Rs. 500 note and so on.
   
2. Have mock transactions with them when they are very young. 'If I like these pens that cost Rs. 25, and I give the salesman a Rs. 100 note, how much should he give back?' and so on. For a child closer to the age of 8, try this - borrow money from them for a few days and pay it back with interest. The math might be beyond their level, but they will understand in simple ways how interest works. With a little extending, this can become a practical exercise in compound interest.
   
3. When you go to the grocery store, ask them to choose a sweet, find out how much it costs and give them Rs. 10 to buy it. They can decide whether to get 10 sweets for Re. 1 each and share with the family, or a chocolate bar for Rs. 10, or something else. Let them choose what they want and carry out the transaction themselves. And if your child loses the Rs. 10 note, don't replace it on this grocery trip. Explain gently but firmly that money is important and should be handled with care.
   
4. At a young age, the allowance should be very small and should be given once a week. Young children cannot plan for expenses of the month, the best they can do is 7 days. They should also get into the habit of writing down all their expenses on a piece of paper stuck on their cupboard. Savings should go into a piggy bank or a coin pouch.
   

Money Education for a Child Aged 9 to 12

1. As your child grows up, his or her money responsibilities should gradually increase. It's at about this age that parents start to tie allowances to household chores. 'Clean your room, put your shoes books and clothes away, finish all your homework, clear the dining table, and you will get your allowance.' This is potentially a bad idea.
   
   If this is done, some children might feel entitled to money simply because they are being well behaved. What they need to learn is good behavior is simply part of being in a family, and everybody does it. Your kids should feel responsible to contributing to household chores, irrespective of their allowance. If their responsibilities are not fulfilled, a better way to teach them might be curtailing of freedom like TV time or bedtime curfew.
   
2. Around the age of 10 or 11, start your kids on a savings plan. Open a joint bank account as this will allow your child to have a little freedom in their purchases. If the lessons they learned from ages 4 to 8 were strong, they will be responsible in their expenditures. If not, wait till they are 13 or 14 years old before you do this.
   
3. Encourage charity. It will not only help your child do good in the world, but also learn the difference between being privileged and being under-privileged. With this knowledge will come understanding and appreciation of their own lifestyle.
   
4. Encourage discerning shopping habits. In this age bracket, kids tend to have more needs but also more wants. If your child wants a particular item, ask them to do a little research on the net and find out various options available. They can do a trade-off between features or prices and show you their findings before making the purchase.
   

Money Education for a Child Aged 13 to 16

1. By this time your child is probably taking tuitions, pursuing extracurricular activities, furthering hobbies, starting to go out with a group of friends and generally doing much more than before. All of these things will require your child to spend money on food, travel, shopping, and so forth. Make sure that whether they are spending from their pocket money or from a joint account using their debit card, they stay within a certain limit every month. As their age goes up and their expenses go up, so should their savings. This will help them begin investments.
   
2. You have probably been investing for them in their PPF account if they have one. There might be other investments in your child's name as well, that you have made for their higher education. Educate them about these investments. The earlier they learn about the difference between equity and debt (on both risk and return fronts) the easier it will be for them to transition from being spenders and savers to being investors. Help them understand the concept of net worth. If you have a home loan, explain to them what that means in simple words.
   
3. Help them understand the concept of the contingency fund. Tell them to assess their expenses each month and categorize them. Encourage them to save up to 3 months of expenses. With your supervision, help them to invest this into a liquid fund with you as the guardian. Reward them every so often. If they are very disciplined and achieve their savings target earlier, encourage them by giving them some spending money.
   
4. It's never too early to learn about taxes. Start with the basics - direct tax slabs. Encourage them to also look at their purchases and expense slips when they shop or eat out. Note the difference between service tax and service charge on a restaurant bill. Help them figure out how much is a good tip to leave at what sort of restaurant. In these little ways, you will enable your child to deal with money practically and responsibly.
   

Conclusion

There might be arguments about allowance increases and expensive purchases and you might even face a situation of 'my friends all have it so I want it too'. You will want to provide the best for your child, but remember that you must also help them inculcate the best habits. With a little love and understanding and practical guidance, you and your child can have a very rewarding experience dealing with finances as a family.

This note is authored by PersonalFN, a service brand of Quantum Information Services Pvt. Ltd., which has over 10 years of expertise in researching Mutual Funds and also provides unbiased views on Mutual funds, Insurance, Gold and Fixed Income instruments in India. PersonalFN provides premium mutual fund research and financial planning solutions to individuals. and also powers research services for Quantum Equity Fund of Funds, a product of Quantum Mutual Fund.

Source: Yahoo!

The Principles of Investing

For over two years now, the market has been range bound, oscillating between the 16,000 to 20,000 points range. Just when it looks like the shackles are lifting comes the turnaround and just as investors start fearing an imminent crash, the index manages a recovery and rebounds.

Consequently, most investors are in a dilemma and quite don’t know how to play out this situation. While some have preferred to wait out the volatility by staying out of the market, others are indulging in chasing returns by dabbling heavily in gold, silver and other commodities. Yet others are gung-ho on FMPs and fixed deposits where in some cases the returns on offer are in the region of 10% - 11% p.a.

However, the truth is there is no reason for investors to get antsy. While desiring a good return is fine, having a rational perspective is crucial. In an effort to earn 11% p.a., one could run the risk of losing 100% in no time! Chasing returns is always risky and its best to avoid greed. Towards, this end, let’s review some of the lessons that one learns along one’s journey as an investor. Some of these learnings emanate out of personal experience, some out of the experience of others and some is wisdom provided by those who have been fairly successful investors themselves.

First up - the market is like a class room where we are taught lessons. The same lesson is taught to you time and again till you learn it properly. Once you have finished your learning, you move on to the next class room where you are taught another lesson. Successful investors are those who learn the most lessons along their investing life.

And the very first lesson in this classroom is regarding the virtues of long-term investing. Actually, the term ‘long-term investing’ is nothing but an euphemism for the combination of the powerful twin forces of compound interest and time. Compound interest in solitude means little. And time without the company of compound interest is equally meaningless. However, most retail investors lack the patience, conviction, heart and stomach required in combining these two forces for any meaningful length of time.

So here’s what one can and should do. Investing all your money in any one type or class of instrument is always risky, no matter what the instrument is. Instead, consciously spread your investments regardless of the external environment. Amidst all the noise, do not let go of the basics. Keep it simple, keep it real. While investing in gold is indeed desirable, have no more than around 15-20% invested in the metal. Don’t buy physical gold, instead use Exchange Traded Funds (ETFs). Allocate another 20% to relatively safe bank fixed deposits or short-term income funds. Cash can command around 15%. The balance can and should be invested in equity, not in a lump sum but in a staggered manner through Systematic Investment Plans (SIPs or STPs). This way, you can let compound interest do its work in the company of time. If the market falls, you get the same stuff cheaper. If the market rises, since you are anyway participating, you make profits. Either way, you win. It is really as simple as that.

Don’t borrow to invest. Ever. Do not listen to tips that your neighbour, train friend or office colleague is so gung ho about. Even if you listen, do not act upon the tip. Instead keep it in mind and be sure to check after a year or so what actually did happen to the hot stock that everyone was so excited about. That is, if it is still traded. Invest with mutual funds with an established track record of at least five years. Choose plain vanilla diversified funds. Then hold fast, hold tight and hold out.

Of great relevance in the current situation is a quote from Warren Buffet. He has said – “Five years from now, ten years from now, we'll look back on this period and we'll see that you could have made some extraordinary (stock market) buys. That doesn't mean it won't get more extraordinary a week or a month from now. I have no idea what the stock market is going to do next month or six months from now. I do know that the economy, over a period of time, will do very well, and people who own a piece of it will do well. Just don't borrow money to buy your piece.”

While Mr. Buffet’s statement was to do with the US market, it can literally be copy-pasted for our market too. Over the next five-ten years, in spite of its politics and politicians, India (as compared to the West) will do well. Do participate in this prosperity. And the best way to do this is by staying invested over the long-term. Do not try and time the market. Despite all the upheavals and turmoil that we go through, at the end of the day, we are progressing. And this progress will manifest itself in the stock market one way or another. The timing is irrelevant, that it will happen is certain. 

Or in other words, making your money make money is really so simple that it becomes difficult. However, if you try and actually apply the above principles, day in day out, month in month out and year in year out, the chances of losing are virtually nil. To benefit from these lessons is up to you. The question is --- are you up to it?

The writer is Director, Wonderland Consultants, a tax and financial planning firm. He may be contacted at sandeep.shanbhag@gmail.com

Source: Yahoo!