Starting early

source: http://economictimes.indiatimes.com

Remember our generation?

For my friends out there who is within my age group do you remember when our parents ask you to save some of our allowance and deposit it in a bank? That was our generation, the saving generation. I remember my dad opening an account for me and my siblings and deposited 50 pesos(yeah back then that amount still has a value but now its just plain 50 pesos).

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But why did our parents did such. To tell you the truth I don't really remember what happen to that account. The very first bank account which I really open for my own was with BPI when I was in college to handle the money my parents sent me for my education in Manila. For most of us our parents are from the provinces and the common notion to gain financial freedom is through savings which was still good at that time. When you are in a rural area savings are good emergency funds that you can pull out in case of emergency. But times has already changed.

Remember my post about how I allocated my salary to six funds?(click here to read that post) Yup these times ask for such action. It is not enough for us to save but we should as well set aside money for emergency, for investments, and other bunch of funds or baskets or envelopes if that is how you do your budget to ensure that when such is needed we can really pull out something.

That is why it is wise to start while young. 

Is it too late for us? I wouldn't say that it is too late but rather let us not waste time while we are at it. At the same time if you are a parent as well it would be nice if you can start your kids not only savings but also investing.  This morning I was cleaning some parts of our apartment's backyard where short grasses have grown. Some are easy to pull out  but some required my 100% strength to pull out. As I was doing manual labor I realize that the longer or deep the roots are the harder it is to pull. 

Why don't we make sure that the next generation, that is our kids, will have deep roots in savings and investing. Now most kids are more prone to materialistic lifestyle which they actually acquired from us. 

Why do you expect a child to save when you yourselves can't. Just like the old TV commercial that says "anuman ang ginagawa ng matatanda; ginagaya ng mga bata" (whatever adults do kids follow)something like that. 

It is a sad truth. We complain why kids today are so unruly, spends a lot, and into such profanity at an early age but in reality what we see is a reflection of ourselves. What you and I see is what we are in compressed form. 

So how are we going to correct this?

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Start early. There is still time. If you have a credit card debt, cut your credit card and stop buying unnecessary things. Little by little pay your debt and simplify your lifestyle. If you want your kid to stop bugging you buying the latest PSP or XBox you yourselves should stop buying new cellular phone every other two weeks. If you want your kids to save up only go once a month to your favorite resto which you usually go to for dinner every other day.

Start small, think big. Start early.

It doesn't have to be a sudden and major change because when you do that you will experience withdrawal syndrome. Cut your spending little by little.

I remember a story of a former alcoholic who nearly  lost his family. One day it just came to a point where he was so drunk that he didn't recognize his wife and kids when he went home. He hurt them. After the effects of the alcohol subsided he realize what he had done and wanted to change. He seek a friend's help who is also priest. His friend told him to spend a week with him. After talking to his wife and kids he bade farewell and spend the week with his friend.

First day was a shocker. When he opened his friend's refrigerator it was full of beer from the freezer to the vegetable drawer. Imagine how he was surprised(probably his friend is also alcoholic). But then his friend told him to grab as much as he can. He was hesitant at first but he got one. After that he accompanied his friend on his priestly work. 

source: http://www.myspaceantics.com

In the evening after dinner he ask his friend about the refrigerator full of beer. His friend told him drink as much as you can today but tomorrow and there after you take out one bottle until you finish all. With that he said okay and did so.

After a few days he started to noticed something. Since he has taken out one bottle every other day his craving for alcohol seems to dwindle down until he can manage to live a day with just one bottle. That is the time he realize his friend's point. Human nature dictates that it holds on to what is already established. That is why he has to take out that thinking or psychology little by little until he it is taken out of one's system.

Sorry for the long story but lets apply this to our saving and investing. Most of the people I meet who have known about my investing venture would ask "how much have you earn now?" expecting me to tell them I earn half a million pesos in six months. It could be possible if I am trading and speculating and if I have a chunk of capital to do so. But I opted to invest and trade a small portion rather than trade and speculate. Because when I trade and when the stock market is down surely I will get a heart attack.

That is why start early so that you can start at small amounts. When you add all this small savings and invest them in a long period this small amounts multiply. They don't grow linear but rather exponential because of compounding which according to Albert Einstein is Ninth Wonder of the World.

source: http://mariosingh.com

Start early; if you are at my age it is not too late but you have to start right away. If you are a parent teach your kids savings and investment. Teach them that when they own a stock they are part owner of the company or if they put their money in a mutual fund a portion of that fund's earnings goes to their investments.

Again I say, START EARLY!!!