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Save Yourself First!

Author: Venkata Ravi Ram/Tuesday, November 6, 2018/Categories: Financial Planning, Expert View

Save Yourself First!

One of the mandatory routines before a flight can take-off is the demonstration of safety precautions by the air steward/hostess. One of those included directions is what is to be done in case of a drop in cabin air pressure which would result in oxygen masks dropping down for each passenger. The action that is insisted to be taken is always put your oxygen mask first, before helping a fellow passenger; this includes one’s own family like children.

Save yourself first, then only you can save others is a very interesting lesson even for managing family finances. That means giving oxygen (prioritising) to those investments that will save you and your spouse in the future.

Until as recently as the 1980’s, Indians used to expect to live till only 50 years of age. Life expectancy as defined by the World Health Organisation is “the average number of years a person is expected to live on the basis of the current mortality rates and prevalence distribution of health states in a population”. As with many things, there has been a significant improvement in life expectancy in India rising from 42 in 1960 to 48 in 1980, 60’s in 2000 and to 67.3 years 2015. Add a couple of years for females. Factors like universal immunisation, better nutrition has enabled this improvement. Initiatives like ‘Swach Bharat’ would help better curtailment of infectious/communicable diseases add universal health insurance to improve access to better medical treatment which would further Indian life expectancy in the future.

Most middle-class homes have a very big financial decision to take when the kids reach college. How to fund their education? Common sources are loans from provident fund etc.  This is movingly depicted in many movies too with parents sacrificing for kids. As with most cases, this too can be viewed from two perspectives.

Starting with parents, if paying for education feels difficult, paying for retirement is even worse. Keep in mind that unless you are lucky to have a job with lifetime pension, for employees, it is provident fund and gratuity that are expected to see them and spouse, till the end. No one else will save for your retirement. With nuclear families becoming the norm, for most, expecting children to provide for parents is not practical. Education costs can be reduced by choosing a university with lower fees or, getting education loan. No bank will give loans for retiring. With longer life-expectancy and factoring that most men marry younger women meaning taking care of spouse’s needs for additional 10-15 years.

From the kids’ perspective, give them a choice, ask them to imagine a future where they pay-off an education loan while getting some tax-breaks for a few years or, taking care of parents including healthcare, till the end. What would they prefer? No-brainer right?!

So, for a change, listen and the follow the aircraft stewards and start Saving (for) Yourself First!

Venkata Ravi Ram writes commentaries on contemporary financial, business, taxation & political issues.

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