It is human tendency to take things easy in life. How we wish we were born with a golden spoon and lots of money and did not have to work, to earn our daily livelihood. The easy availability of money makes one laid back when it comes to understanding its importance and using it prudently. In fact, a person who comes from a basic humble upbringing, values money more than a person who is born in a wealthy household. In our country, there are three different sections of society with different needs of money.
For a daily wage earner, every penny counts. He toils away on an hourly basis to earn money to support his family. To quote an example, in our country it is a common sight to see labourers toiling away at construction sites along with their respective spouses. For such poor people, money is everything. They earn and spend most of it. Basic amenities like proper medical help and sending their children to a local school are their priorities. They do not think about investing in products like mutual funds, stocks and other fixed income instruments. They would rather park their money into chit funds or in no frills savings account if they can afford to. Such people view money as an important part of their life and understand it’s value to them. Such people usually live like this most of their lives and do not get an opportunity to get out of this penury.
Then there are the middle class investors of India who form the major chunk of the investing population, purely by their numbers. They are the people employed in IT, ITES, banking, manufacturing and other upcoming industries of India.
It is notable that most of the middle class investors come from humble backgrounds and haven’t seen opulence previously, in their lives. In that sense, they understand its importance and worth, however, their awareness of how to best deploy that money to make it work for them is usually lacking.
Among these middle class investors, you will find a large population who are not aware of proper money management. They invest haphazardly, at the advice of their parents, local LIC agents, commission seeking advisors and meet-my-sales-target relationship managers, among others. These are also the investors who are sitting ducks for people who want to mis-sell products.
In this category, at the other side of the river are people who are educated and take the onus of learning about personal finance. They are aware of the different investment avenues in the market today, what risk each one carries and where to put their money in. These investors seek the help of financial planners and follow a methodical style of investing. Such investors benefit in the long run.
At the farthest end of the spectrum are rich investors who at any point of time are sitting on lakhs of rupees in their bank accounts. For such people, money is no longer a means of providing basic amenities anymore. Satiated with the happiness that money has given long back, such investors deploy their money with many big firms and brokerage houses, expecting them to multiply their corpus many times. A small blip in the principal invested does not make them jump ship. For them, this is like a small droplet of water that has evaporated from a big ocean.
Such investors do not necessarily need financial planning, they need wealth management.
Money is an important part of our life. Our background in life teaches us how important it is for us today. The way we treat money today in front of our kids will shape how they look at it when we are not around.