Friday, September 23, 2016


The reason for the long title: Small sample size of non-random sample.
But I believe it reflects the financial literacy of a large section of people of Bangalore.

I had never heard the word financial literacy until I moved to Canada. I knew the terms such as money management and budgeting. I think I also was okay at managing to live within my income and save in advance for large expenses such as buying a vehicle and so on. I did understand that one could take loans from banks if eligible and to return the loans with interest.
That was the extent of my financial literacy.

After seeing the major financial problems faced by a few, close Bangalorean  friends and relatives  I realize that many 'educated' middle class and upper class urban Indians lack financial literacy. Below are 8 of these financially illiterate people.
I will then talk about what I think, needs to be done to set this right in order, to avoid the problems which families face due to financial illiteracy.


I know a person, who was born into an extremely rich family, with a BA degree who knows less about money management than others with lesser education and age than her. She has no idea how to write a cheque, how to deposit a cheque and so on.  Besides this, she has decreasing income for the last many years. Yet, she simply does not say no to her kids when they demand items which are 'not vital' such as eating out, buying fancy clothes and travelling by auto. She has not tried to explain to her children about her reduced income, her inability to manage the house, etc. She has started borrowing money from friends for things which she can easily do without! She has no idea where she will get the money to return when the time comes. She has no plans if her friends do not loan her the money! She too is coasting by in a way which scares the rest of us.

I also know another  who once worked as a bank manager, and now trades in stocks and shares who has relentlessly traded, despite losses and warnings and is near bankruptcy. He  has lost a lot of money and is required to pay huge interest. This guy has no excuse for his financial  mismanagement with all his knowledge and experience! His addiction to trading on the stock market has done him in , yet he cannot stop himself!

 I also know another 80 year old person with limited income but who is constantly taking loans and paying interest and refuses advice of well wishers and knowledgeable people.

  I also know another person who is himself, financially literate but who does not let his wife become financially literate. He refuses to involve her  in his business and keeps her as a 'housewife-whose-duty-is-to-look-after-the-home'.  She unfortunately is now  in a position of utter helplessness and ignorance if anything were to happen to him.

 I also know another person in his 50s, who has never ever had a sense of fiscal responsibility. He often loses jobs or changes jobs. Yet, he does not save for a rainy day and coasts by life on the support of others. He has a wife and son to support but he has no sense of responsibility at all. He has absolutely no thoughts or plans about the future! He never seems to ask himself, while  spending lavishly, 'what will I do tomorrow if I don't have a job or savings'? He also has mental health issues, so that may sort of excuse his financial illiteracy.

 I also know another person as young as 14 who ask their parents to buy them the latest phones, clothes, dvds, books and so on, without even wondering if their parents can afford to buy them. They don't have curiosity about the amount their parents earn, how much is spent or saved every month, where does the money go, etc. Neither are their parents  trying to teach them about income, expenses, how much, how to balance, etc. They are silent about money and simply buy the kids what they want!

 I also know two people with families i.e. wives and children. They continue to live with their parents and do not contribute to the household income. One has zero income and he receives money from his parent who gets the money from her other son who's working abroad. The other relative and his wife and kids are supported by his dad's pension, rental business, and so on. What he earns is his pocket money, though he is now in his 40s.

 I also know another person who initially was doing business but due to his deficits, he was incurring losses. Yet, he & his mother, refused to let his wife work! Finally the wife, left him took employment and supported herself and her daughter who is now educated and working herself. The wife is now supporting him too! Yet, this person has neither insight about his lack of money management (he's lacking several other important and vital virtues!) nor gratitude to his wife!
I know of several other people who suffer from financial illiteracy, destructive personality traits and self-destructive behaviours but these cases above should be enough to illustrate that there are a range of people with financial illiteracy.

What to be done to improve financial literacy in India?
(1) Financial literacy should be taught in schools. Children should be introduced to money management skills in a fun and practical way as early as grade 5.
(2) Financial literacy classes through realistic scenarios and problem solving in multiple ways should be taught briefly in every class with increasing complexity of practical issues which the children see and experience in their own families.
(3)For those who can, children should be involved in the school's finance management at least partially and also at home. They should be encouraged to give ideas, suggestions, short think aloud and the older adults can gently advise them if the ideas are not feasible.
(4)Children should go to banks and learn to deposit cheques, draw money, know how much interest the bank pays them, how much interest their parents pay the bank and so on.
(5)Children should be involved in the family's budgeting so they understand how much money goes where every month. For example, from the time a child is in 6th grade i.e. approximately 12 years old he or she should be educated about the monthly expenses of the family:bills such as electricity, water, house tax, phone, internet, TV cable, groceries, petrol, bus passes, school fees, pet food, health insurance or regular medicines, toiletries, etc. If a child has an idea of the expenses and the family income, he needs no advice about money; he will wise up when he sees all the costs of things.

 I am not really sure what is the right time to teach children about money and budgeting; But my guess is it should be around 12 years as the child enters his teens. 

 I am not sure how much Indian urban parents should reveal about their income and expenses to the children, without making the children feel burdened with responsibility too much for their shoulders or making them feel guilty.

I also have no answers to children of families of really low income group about how to teach their children about finance. How can you tell a child that he is not going to have something absolutely essential as his parents don't make enough money?

I have no idea how illiterate (but otherwise smart) Indians would teach their kids about finance...but I have come across really smart finance management among illiterate women who work as maids in city houses and farmers wives with low literacy or illiteracy manage their household budgets in villages.

I have absolutely no clue how farmers who face the cycle of droughts and floods, who earn so little, who have impossible loans to return to the bank or even worse the private money lenders teach their kids financial literacy. You should first have 'some' money to teach them and when you don't have money at all, what kind of theoretical bullshit can you teach them! when you spend 20 thousand rupees on seeds, electricity for pumping water from wells, fertilizer, feed for oxen, etc and the harvest yield is 15 thousand rupees as the crops failed due to heavy rains, what can you teach your child about financial literacy? 
If I were a farmer(from my village) and you came to teach me about financial literacy, I would probably punch you in the face. You ask why? Here's why? My father, a farmer, sells the grains and is secretive and never informs me about the amount of money he made by selling our harvest; my mother secretly saves money from the money she makes working in other's fields and selling our cow's milk; I work like a donkey in my fields but get little or nothing from my father. My wife keeps fighting with me as I have no money to give her to buy even glass bangles. My kids get money more easily from my father than I can get out of him. So, if you come to teach me about financial literacy, I would probably strangle you as I am being strangled by my father, my mother, my wife, the 7-year-long-droughts, the government which took away half my land to build roads and the local officer who swallowed the compensation given by the government to give us for the land. I pray this corrupt government official and his family perish!

I also have no ideas about how the families where members make money through bribes will educate their children about finance! How do you explain to your 12 year old daughter that you have 12 lakh rupees in your bank this month when your income is about 10 lakh per year? How do you tell her that you made 12 lakh rupees by giving driving licences to shitty drivers after taking bribes? What are these parents supposed to teach in finance literacy to their kids? Do they teach them to get into jobs where they can take bribes? Or do they teach them to spend lavishly as money will come in all the time? Or do they teach them to be frugal as they don't know when this money will run out? Do they teach them to be honest at home but steal and take bribes outside? I really don't know how a financial literacy lesson would go in the household of corrupt government officials and politicians of India? What values do these corrupt people impart to their kids? I would love to be a fly on the wall in their homes!

How will a father who is not earning but depending on generosity of his siblings teach his kids about financial literacy? How will a ...
I am simply thinking aloud here. How will a poor village temple priest, whose income fluctuates wildly from low to nil teach his kids about financial literacy? I wonder if one can really cope with the concept of financial literacy when one is utterly poor...when I imagine myself in that place, I cannot even think of terms like literacy! I just want to do anything to feed myself then and there...I cannot think to plan for  even the next day or next week as I am so starved! As I write this, I am beginning to believe that one needs to have some financial stability to even think of financial literacy or financial literacy's simply a cruel joke. 
Teaching financial literacy to 50% of Indians i.e. the poor is as meaningless as classes about  'healthy eating and nutrition for  people who don't have even have food to eat!

HYPOTHETICAL FAMILY: Imagine a lecturer in a college and his wife who's also a lecturer in a college are earning a combined income  about one lakh rupees a month. They have two teenage children  in high school ; the couple  tally their expenses daily and share this information with the children .  The children get to see the expenses and have an idea of how much money is coming into the family monthly and where the money is going out. I believe this will give a lot of valuable information, knowledge to the high schoolers and they will also learn vicariously, the best ways of planning and budgeting.
I guess these are the expenses in Bangalore
rent//food//waterbill/electricity bill/ gas bill/ petrol and bus pass/school fees/ phone bills for four//food//toileting materials//religious expenses//gifts to family members & friends for functions// savings such as life insurance,etc//loans and interest for vehicles, house building loans, etc// health expenses (now with dengue all over Bangalore, every house I know has been affected!)
If the family, is open about their income and expenses with their children and very meticulous about recording all the expenses, the children will automatically learn a lot, become more thoughtful and reasonable in their demands and WISE.

The peers I know are not open with their children about their income for many reasons such as
They never even thought of this; they never thought of the idea of sharing their income details with their children.
Or they don't want to share as they think the children are too young and then don't know when to draw the line and say, they are old enough now and I can share this information.
Or they don't want to tell the children as they don't think their kids can keep their mouths shut! They may worry the kids will blab to the relatives, etc.
Or they are ashamed they are not earning enough. I know of many middle class graduate women who have no idea about their husband's income!
Or , they are taking bribes and  don't want to share this information openly with their kids. I know there are several government officials whose bribe is much greater than their salaries (not any of my relatives or friends!) and how will they explain to their kids?

I believe that writing out the income and expenses in detail and sharing with the immediate family members will help expose the errors in budgeting of the money manager in the family, usually men. If the expenses were made into a pie chart or percentage, the family would know immediately if some area was getting undue amount while another area was being neglected. I know a man who had  terrible money management skills and who was also, very autocratic and bossy that he had his way. He would spend more than 50% of the income on non-essentials such as books and grudge to give money to essentials such as food items and groceries.

I believe that every school in India should have classes for household budgeting and ask the students to come up with sensible budgets for various incomes and expenses for a variety of households. I believe this will help to avoid future mismanagement of money when these students become working adults.

Many families want to shield their children from money worries and other worries. But I strongly believe that this shielding causes more harm than good, in the long run. Once they are 16-18 years old, they should know the true money situation in the home; it will give them an opportunity to grow and become more mature; I guess children will become less demanding when there are aware of the true monetary situation; they will make sensible and financially INFORMED choices.

Some of the stupid financial-related thoughts, behaviours and actions I have observed among my own family, friends and people I know are given below:
  • Pretending they have more money than they actually do.
  • Not telling  'no' to the children's unrelenting demands 
  • Thinking that if they give all that the child asks,' the child will be happy', 'will study well', 'will 'behave', 'the child will obey', etc.
  • Borrowing money to buy  non-essential things.
  • Labelling luxuries as essentials and buying them
  • Not having money, yet buying to keep up with the Jones by buying on credit.
  • Borrowing without having any realistic plans regarding how they will repay. Not factoring in the interest when they plan to borrow.
  • Being unrealistically optimistic. Not having definite plans regarding repayment but thinking vague things like "I will somehow return": that word 'somehow' drives me c-r-a-z-y!
  • Having poor money management skills themselves.
  • Poor relationship or poor communication or 'embarrassment to talk about money' between family members and therefore:non-discussion of money matters; non-cooperation around money matters; active 'revenge-buying' things when angry with spouse!
  • Borrowing from parents (grandparents  of the children) or receiving financial and other expensive gifts from parents to maintain a life-style, they cannot earn-to-be-able-to-afford.
  • Expecting well-off relatives to take care of some of their needs
  • Expecting the dowry the son brings in to take solve their money problems.
  • I know many many middle class Bangaloreans are  investing heavily in real estate i.e. sites and houses as an investment and source of income. They do not factor in many costs when they make this investment such as the 
  • (1)high rate of interest to borrow money to build or buy the house, 
  • (2) the high cost of building a house and 
  • (3)the money which goes for bribing government clerks to build, 
  • (4) the difficulty getting renters as there is such a lot of empty flats and houses in Bangalore (in 2016)and
  •  (5)cost of maintaining the house in good repair, etc.               Nearly everyone in Bangalore seem to believe that real estate is the best way to invest money and as it's not true all the time, as observed by the many people who have had losses. I know a guy who could not sell his house in Gandhi Bazar for 4 years though it is a prime area!                                                        Now the government wants people to show that their money is 'white' when they buy a house; However it seems like people with white money cannot buy houses as they don't have enough and people with black money cannot buy the houses; even if they are willing to pay the full amount... the government wants them to prove that their money is white and as they cannot prove that, they cannot buy! So sellers are sitting on unsold homes and apartments for years paying interest on the loans they took to build and suffering losses.
  • As far as I know majority of people in my circle in India (Gowdas, middle class, urban and rural, Bangaloreans and Tumkur people) DO NOT INVEST in stocks and shares. I myself am wary of it and have never invested in stocks. I have been told that investing in them is wise but long story short, this is one major area of ignorance and paranoia among many people in India/Bangalore. People prefer real estate to stocks and shares. This has lead to a host of problems such as :The destruction of the environment in Bangalore and maybe whole of India, cutting down of trees in cities, drying up of water beds and ground water levels, conversion of agricultural land to residential areas, conversion of forest land leading to depletion of wild life and forest wealth, a glut of homes and apartments lying vacant even in crowded places such as Delhi and Bangalore, etc. Teaching Indians about investing in things other than real estate may also improve their financial literacy.
  • I also have a pet theory. If the corrupt politicians of Karnataka with their children who have IQs of 70 are taught financial literacy, then they would not need to be so corrupt and rob the people of Karnataka. They could use their money smartly; make money smartly with wiser investments and be less corrupt and decrease their robbery. For example, one asshole politician has built 5 star hotel in small towns where people cannot afford to pay 5 star hotel rates. This is a huge loss but he does not care as it is money not hard earned but looted. Giving more thought to this idea, I realize that there is no motivation for the Karnataka politicians to become financially long as they can loot instead of working hard and honestly, there is no compelling reason for them or their kids to strive for financial literacy.
  • I have another theory..if politicians of India were forced to learn about financial literacy, they might make more money by wise spending and investments and feel less need to loot. But, on the other hand, I don't think financial literacy will take away the core evil in their shitty heads s i.e. greed.

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