Investing is an absolute necessity – I would call it part of the 5th R – Money! It is also scary! Imagine it is at a cross of politics, mathematics, emotions, markets, salesmen, and your own future. For a non-investor it is unavoidable and scary.
How can a person explain investing to a person who is scared about investing? Simply by giving examples of our day to day living.
Tell a housewife that if she can plan and run a house, she can look after the house’s portfolio too
Tell a man if he is doing ‘costing and budgeting’ for his employer, he can do the same thing for his family too.
Tell the family that building a financial plan is like building a bridge – you should assume that there will be overloading and likewise some excess capacity has to be provided for.
Compound interest is like buying mango and using the seed to start a mango farm. How many mangoes will be created out of one mango is infinite! We all know that one mango has one seed -but one of us knows how many mangoes are there in one seed. Even a seventh class kid understands this concept.
Investing in good companies is like cooking – putting more heat will not make things faster. One has to know the technique and require adequate patience.
Families are kept together by sensible parenting. Parents can sit with children and explain all these concepts to children. Tell them the difference between needs, wants, luxuries and how the family prioritises its money usage.
Tell the children and others in the family that equity (or commodity or crypto) trading is addicting and can ruin their lives. Example of Yudhishtra (from Mahabharat) of how addicting gambling can be! Investing is very boring but makes a lot of money in the long run. The earlier you start, the more you invest, and the longer that your money stays invested, the more your wealth will be. Telling people ‘your dish tastes more sweet when there is more sugar’ – is easy to explain, is it not?
The more examples that a salesman or a relationship manager can give the easier it is to explain life and general insurance, mutual funds, portfolio management services, etc. to the end clients. For the financially responsible family member, who handles finances, it is necessary to explain all this to the other members of his or her family.
When our kids are growing up, we tell them – ‘Be careful, don’t talk to strangers’. When parents become older it is necessary to remind them of this very lesson. Once you are a senior citizen, it becomes necessary to be updated about online frauds, scams, spam mail, etc. It is not always easy to ‘parent’ a parent, but it is necessary to do so. Keeping them out of harm’s way is as important as keeping your children out of harm’s way. Both physical dangers and financial dangers are things one has to worry about.
Explaining all these concepts to all the people connected with you with such examples helps.