Why Teenagers Need a Financial Education

In 2019, our country produced 8,80,000 graduates of computer science engineers, 67,218 doctors, 61,680 lawyers and thousands of whiz kids who are thriving in the profession of their choice. Aah, such prodigies, who finally made it through the education system and got the dream job. Their salary packages, by the way, can range from anywhere between 1.5 lakhs to 5 crore p.a. Drooling much?

They did it all. They got the good grades, went to a prestigious college, and got a good job. What else could they ever hope to achieve? Isn't this exactly what our parents want us to strive for? 

Then why is it shocking, that according to the latest data point published, it is estimated that on an average, every Indian inhabitant has a debt of $1376 to their name? Nearly every Indian owes Rs 1.3 lakhs to somebody. Let's forget these statistics for a minute. It's story time. 

Rohan, a 25 year old, has just graduated top of his class from IIT Madras after pursuing B.Tech in Computer Science and Engineering. This did not come easy. His journey began at a time when the rest of his classmates were reading novels and playing football. All throughout his high school years, Rohan worked hard and devoured his books and prep material. He sacrificed his emotional and social well-being, all for that magic word: 'IIT.' His only hobbies were having 3 meals and getting 5 hours of sleep. Every teacher's delight, this kid secured 97% in his 12th board examination and got a rank of 90 percentile in JEE Advanced. With an easy entry into the best IIT college in the country, Rohan remained the star kid who wowed his classmates with his marks and impressed his relatives near and far with his accomplishments. After countless all-nighters and a significant deterioration of his will to live, we've caught up to where he is today. On placement day, Rohan bagged a job with Microsoft for a gross annual salary of Rs. 36 lakhs. With his education complete and a good job secured, his parents had near-attained nirvana while their son prepared to enter the workforce, knowing not what lay ahead. 

Keeping aside the fact that engineers are the most educated unemployed in this country, and they are the most disposable workers, let's assume Rohan is continuing with his stellar performance at work too.

His first month went well, apart from a few disputes with his colleagues over his lack of communication skills. No big deal, that doesn't matter right? And there, his first pay check arrives!
Rohan knew he would have to file for income taxes after receiving his monthly gross pay of Rs 3 lakhs. But nobody had told him that after the legislation of "Current Tax Payment Act of 1986" in the US, other countries had followed suit. The Act allowed governments to get paid first, then the employees. This is why corporate workers find a lot of money missing in their pay check. He was quite shocked when he received only Rs 2,70,000. Nevertheless, he kept working 80-hour weeks for Microsoft for the next couple of years while depositing some amount in his savings account every month in the name of 'investing'.

At 30, Rohan got married and a whole new set of responsibilities fell upon his shoulders. 
For a man who had succumbed to parental pressure all his life, he did not hesitate when they asked him to buy a house in Chennai, as the market was up. The luxury 3BHK costed Rs 3 crores. He made a down payment of Rs.10 lakhs, and entered into a loan agreement for which he would be paying Rs. 2,50,000 every month for the next 10 years. Thinking he had made an 'investment' which he could upsell later, Rohan started his family life, not knowing just how deep his financial woes were about to be. 

3 years later, Microsoft disinvested in Telewest, a telecom company that did not fit in with Microsoft's core business. It was sold at a loss, causing a plunge in Microsoft's stock value. In simpler words, this disinvestment and subsequent loss spelled disaster for the employees of the company.
15 years ago, Rohan's coaching institute had brainwashed him to believe that IITians who can secure a good corporate job will never have a worry in the world. They most definitely never taught him about the phenomenon of 'downsizing'. Several hard working employees like Rohan lost their job. Because they were living from pay check to pay check, devoting every single day to office work, they had not set up any other source of income to sustain their livelihood. The 'teacher's pet', maa ka ladla and bearer of huge amounts of liabilities realised very late in life that good grades or a college degree won't pay off his bills.  


Instead of being a slave to the outdated education system, if Rohan had invested in a financial education, he would have known that:

- In India, tax payers can avail tax deductions of upto Rs 1,50,000 per year by investing in options covered under Section 80C of the Income Tax Act, 1961. (Instead, he chose to invest as per the whims of his family and their misinformed advice. )

- Inflation rate in India is steadily increasing. (This means that the 'real value' of the savings he used to put aside every month would only decrease every year, so it was never an investment to begin with. )

- Capital gains are heavily taxed. (Even if Rohan would sell his house, he would lose most of the gain in taxes. Most people spend their entire life paying off debt on their house. )


Unfortunately, there are thousands of Rohans around us, who are academically brilliant and live in big houses. But beneath that deceptive layer, there is a great lack of financial IQ. These Rohans are responsible for the per capita debt of India which stands at $1376. 

In India, the land of all taboos, talking about money is considered distasteful. It is a crass topic which is not acceptable in social conversations. Believers of this notion are the first to find themselves in financial ruin, because they never took the time to learn about money. Money may not be able to buy you happiness. But the LACK of money can cause the kind of stress that drains every ounce of happiness from your life. This is why we need to educate our students about money as they become young adults. Even basic personal finance lessons can go a long way in ensuring their financial security. While Rohan learnt his money lessons at the peak of financial ruin, the rest of us can start educating ourselves at an early age and become financially fit. 
I hope this blog has motivated you to start your own financial education journey and rethink your ideas of job security. 

Signing off, 
Tarushi Thakur.
Bangalore, India