Safe & Smart Money Advice for Students

04 August 2015

Moneylife Foundation conducted a financial literacy seminar for 250 students of Vaze College in Mulund, Mumbai

There is little in college education that can prepare you for the intricacies and realities of managing your money. Before college students go out to get a job and earn their first salary, it is important for them to have a good understanding of what it takes to protect their money and invest smartly in a manner that would allow them to build long-term wealth.

Moneylife Foundation conducted a special programme for students—“Be Safe and Smart with Your Money” in partnership with Vaze College, Mumbai, for over 250 students. The first session by Sucheta Dalal was on how to avoid costly financial mistakes, while Debashis Basu explained to the students how regular saving, started early in life, can help build long-term wealth through the power of compounding.

Ms Dalal took the audience through the ways in which confidence-tricksters use social media to cheat people and how social media and email have become the happy hunting ground for a variety of fraudsters. She explained some of the most common scams that cheat people of billions of dollars, worldwide. These include lottery scams, job scams, the Nigerian scams, advance-fee scams—all of which have infinite permutations and variations. She then explained chain money schemes or pyramid schemes and how they lure people with the promise of quick high returns to build an unsustainable pyramid.

In the second session, Mr Basu explained how the principle of compounding allows regular savings to translate into large corpus. He stressed the importance of starting early; the time lost initially cannot be made up by saving more later. Mr Basu also said that it is important to save in a few, safe financial products that will offer high, inflation-beating returns over the long term.

Mr Basu said that those who can ‘delay gratification’ or spending, by saving more in the earlier years, are not only wealthier, but also do better in life. He explained this by narrating the ‘Marshmallow experiment’ on four-year-olds. A bunch of kids was given a marshmallow each and asked not to eat it for 15 minutes. The one-third, who successfully controlled temptation, were tracked over the decades and were found to have done much better in life than the rest.

Where does one invest? Mr Basu explained the need to keep it simple. While not going into details of various investment products available, he gave a few suggestions. As college students have time on their side, he advised them to invest in equity mutual funds and stocks with an investment horizon of 15 years or more.

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