Money Management 101 for Students

Hello young friends. The title of this post may seem out of sync with your realities and current priorities, but let me have the opportunity to prove otherwise.

Money, as we know, turn the keys and move the levers; it is important and a necessary tool to get many things that give us pride, joy, comfort and upgrades in life. Money helps us to get education, get best medical attention when we fall sick, enables us to throw parties and have pizzas and watch movies with family and friends. So it is central to almost everything we do. And you know what; it is the prime reason that most of you have chosen a professional course over the more traditional ones. So, let’s first make up our minds that it is a necessary thing to have. Like it is famously said that, "it is better to suffer with lots of cash in hand than without it." At least, we get to choose our many of the sufferings  :)

I am not a very successful person when it comes to measuring success with the bank balance, but I have learnt the lessons hard way and am inching, slowly and steadily,  towards a better tomorrow for my family and myself. So here in this post I am only sharing some of the things about money which were handed down to me by my parents and elders, and I take the liberty to add my own twist to it for making it more contemporary.

What is THE NEED to Learn About It?

The reason to start knowing about money is like those for everything which we already do not know about -  If we know about it:

  • we will become comfortable in its presence, or its absence;
  • we will neither run from it nor run after it;
  • we will not get intimidated by someone who has more of it;
  • we will find better ways to use it, earn it, and spend it to the best of our use and satisfaction; and finally
  • we will MAKE IT WORK FOR US and not the other way round.


The Golden Rules of Money Management

The equation of money is quite simple, but not too simple. It is because of the emotions we attach to it. It has been shown in various researches that the pain of losing Rs. X is far greater than the joy of earning the same amount of money. So the first rule of the Money equation is: Never lose it! Isn't it simple.

But the simplicity of the rule can be deceiving and cause us to actually lose it without even realizing it. For instance, when you order a pizza or a soft-drink, you are not realizing that not only are you spending way too much more than the actual pleasure you derive from having them, but are also digging a grave for your future earnings to bury them into! But "how's that even possible?" you may ask.

When you have pizza or a soft-drink, you get an instant high, resulting in its craving and wanting more of it later. Therefore, if you are like me and most of us, who are tied to our taste-buds, you will go again for the new flavor, for the new pizza-joint, for the unlimited pizza deal and in the process will spend too much on it within a short period of a couple of months. Not only that, you are inflicting on yourself irreparable damage in the form of health problems arising due to unhealthy diet and adding to either lost opportunities (money lost here) or fatter medical bills (and money lost there) or both.

Similarly, when you spend money on some latest gizmo or fancy shoes or a dress you would wear only once in a year, you are throwing away money like you have a tree that bears leaves of Rs. 1000 notes and not some old and boring green thing! So as the wise have said - A penny saved is a penny earned.

The second rule is to identify the things that eat away your money like termites decay the wood. Understand about inflation and taxes. Now you must be laughing at the stupidity of the writer of these lines, but beware that inflation, taxes and death are the three certainties of the modern life and times. We cannot avoid any of these, but can make the pain of the first two manageable and the third one a worthwhile.

The third rule is make money work for you! And how on earth and heaven shall I make money - a non-living, passive entity - work for me? By investing it! So, if you want the money to make work for you like it is your servant (or even slave) you should know what it is capable of doing for you. You cannot expect a barber to mend your shoes and nor will you go to a PhD in physics for treatment of your tonsils! You seek the specialist for your specific needs.

To become a manager of your money and for beating taxes and inflation, you MUST know how to put it to task. As a student, you have many more responsibilities than chasing financial experts and reading and filtering plethora of financial information. But as a student you can start small, and start learning the ropes pretty simple and easy, without even bothering yourself with the details. The how part is dealt in the following section.

But before making the money to work for you, you need to have some basic facilities in place – it’s like having a properly stocked and well-lit library to study or an Internet connection to watch YouTube videos. These are:

  1. Have a Bank Account with Cheque Book
  2. Get a PAN Card
  3. Get Aadhar Card
  4. Learn about the Magic of Power of Compounding

Moving ahead, the four step strategy for learning the real and practical money lessons is to do it. It is not necessary that you follow all the steps given here and in the given order. But, assuming you know as much about money as I used to when I was your age, that is practically nothing, these would serve as the basic template. Here we go:

  1. Cash is the KING (Mark your bank account as Untouchable )
  2. Start a PPF Account 
  3. Start a RD
  4. Invest in a Business 

These all steps you can do on your own if you are already 18 years of age. In case you are less than 18, then you will have to convince your parents to do it on your behalf - they will open accounts in your name but will act as legal guardians for you.

In the end, I would thank you for your patience in going through such a long post and wish you luck in a fruitful and prosperous monetary life ahead.

Mudit Khetan  ( Assistant Professor , Jaipur National University )