Fiscal Prudence
“Money is shit but no money is more shit!”
(My economist Professor Rod Burgess at Oxford Brookes quoted this in our class of Globalisation in Oxford when explaining Bretton Woods’ Structural adjustment program for developing countries and sharing his personal experience of trying to find a living in Thatcherite Britain as an LSE graduate and some what blacklisted in those days)
For long I had been wanting to pen down my thoughts on blog but it was difficult to overcome the inertia. So finally money matters moved the Bania in me to write something! The article is not about moneymaking but is about importance of personal financial management with our consumption-driven lifestyle today.
For a while this has been on mind as I am studying both Economics and Public Policy and Financial Management this term at my MBA. So ample of Vitamin M theory doses to digest! It has not been that bad actually as I see I have good appetite to stomach it well. So coming back to “financial prudence” the buzzword I kept coming across this term and presentation by a classmate Sarah made it somewhat “incepted” in my mind. I see financial prudence twofold at individual level- one is the saving ability and the other is the investment ability that will yield one fruits of their savings when invested wisely. Another classmate Nelson raised it in class about the cultural habits and savings. And that is when my brain started to think over this again. I also came across Warren Buffet’s bio on web and I must sheepishly admit that I was impressed by his financial prudence, his savings ability as child and business acumen even when I am not much in favour of current capitalist economic model and the functioning of financial markets.
In my short stint with a UN agency in the Philippines I came across a microfinance program where they had some experts from Bangladesh/India brought there to promote culture of savings so that a successful microfinance activity can be promoted among poor Pilipino communities. Unfortunately, it was proving to be hard there, as culturally saving was not their habit. And now I study how bad Australians and Americans are when it comes to savings and how that is not helping the economy (especially American) since both individuals and collectively as nation they are mortgaging their future for current consumption as I read it in my Harvard Business School case.
I started observing since my days in Manila the cultures with strong saving habits. A few I could see apart from some Indian communities were the Chinese, the Japanese and the Jewish people. As a child I was raised with good savings habit. From quite early on we started getting pocket money when it was not a common practice in India to have pocket money. My parents would often give match up grant to us to go with our savings when we wanted to buy something useful. One of those occasions I remember was our bicycle. I think it was glamorous (by standards those days) “Hero” ladies bicycle costing 700 rupees where me and my sister had saved 350 each and then 350 was added by my parents to get us this shiny new metallic colour bicycles- our first new big asset! (No cameras then with family to capture that moment!)
Most of my mother’s kitchen was created by her savings. I remembered walking with her to Allahabad bank for her to make monthly deposits in her savings account. Walking with her I used to think when I grow up I will also have a bank account and I will save like my mother. But hey I did not even have to grow up much to get a bank account; I was in 6th grade when I along with my siblings got our first bank account at State Bank of India. And following years for more than a decade we cycled to our bank to deposit our savings and eventually also started to manage our parents’ bank accounts and started going to bank on our scooters. We siblings are one of the longest served clients (may I also add small client J) of our bank branch witnessing changing in banking system and automation and computerization. So growing up with culture of saving and if I also add savvy financial management made us value money more. Thankfully, my family is also one of the least materialistic Indian families and their insistence on us developing this prudence was to understand importance of money and value it for its better management of personal finances and use it in the right place. I was also told that money should be treated as a by-product and not a pursuit in itself.
Other example of this prudence was when it came to the Indian festival of light- Diwali where clearly there was disincentive for consumption vs. incentives for saving. If you want firecrackers for Diwali then you get crackers worth only 50 rupees. While if you decide not to buy crackers then you get 300 Rs! I was clearly at loss since I for longer decided to buy crackers until my parents told me again the violence (on small lives), noise and air pollution it generates. So I too volunteered not to fire the crackers any more may be from my 8th grade but that also meant that my siblings no longer received any incentives! There were also times when my father took us to animal charity in the city and we donated our savings out of compassion! It was hard to part with savings but when I looked in the innocent eyes of wounded and paralysed dogs I could no longer be greedy!
In this environment my brother started his first business of selling slate-pen to neighbours when he was in 10th grade and my sister and me started our first business of selling silk-fabric to boutique in my city Ahmedabad when I was in 10th grade and she was in 12th grade. None of the businesses lasted long enough for them to become our careers but that surely generated little funds for us to save to contribute for our education. Both my undergrad and Masters had heavy contribution of my own savings. For my Masters when I went to the UK I got scholarship for tuition fees and my Uncle-Aunt in the New York extended generous support for living expenses as an interest free loan. I don’t think I would have received this level of education if the family did not have a culture of saving. One of my best friends has Jewish heritage and she was telling me how she too learnt to value money and importance of saving. On her getting her job with the UN her parents supported her in buying her house in Melbourne so that she is investing and saving for her future.
In India we often come across stories of destitute or widow women give best of education to their children from their little savings and they become something in future! Well, after all the giant Infosys today too was created on Sudha Murthy’s personal saving of 10,000 Rs! The point here is that sometimes culture and current financial system do not help people understand importance of robust personal finance management. So we see that in developed nations individual debt is mounting, as people are not just consuming what is supposed to be their savings today but also their future savings. That sounds terrifying and detriment to their future! The ruthless banks make you deep in debt before you are even out of Uni. And one cannot blame banks if individuals are not aware about their choices and not concerned about their future. Banks are doing business.
So I really wish young people today and coming generations develop habit of saving, develop fiscal prudence and cut down on their consumption for them to stay in charge of their future and not mortgage it!
