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Women's Weekly: Penny wise, pound wiser - Views on News from Equitymaster
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  • Oct 3, 2009

    Women's Weekly: Penny wise, pound wiser

    Keeping cash in the cupboard is a strict no-no

    There is a beautiful line from P.S. I Love You, "No matter how hard you hug your money, it never hugs back." But hug a child and you will receive the warmest, sweetest hug back. A hug filled with sunshine and smiles. A hug so warm that all your troubles , all your worries will melt away, and be replaced by the tinkling laughter and laughing wind chimes.

    Yes, children do that to you. And then you know why they are called angels - little angels who make you search for that ephemeral rainbow and smile in glee when you spot one with your child.

    So, it's no wonder that we want the best for them. They, who make our present so beautiful have a right to a secure future and so, while we may not want to hug money, we definitely want to store it, save it and make it available for our children whenever they want it.

    So whenever we can, we save. End up buying one saree less or postpone the much needed AC or simple forgo a fancy restaurant dinner in the hope that the money saved will be one more warp, one more weft in the security blanket that we weave for our children.

    All the money that we save and all the money that we find in our husband's trousers left in the laundry basket gets quietly stashed in the cupboard, to secure the future of our children.

    If you think that the cupboard is the most safe, most secure place to keep your cash, you couldn't be more wrong.

    As our children grow up, so do their needs, and their demands. Household budgets tend to get stretched and readjusted, in order to meet these demands. And then, when we fall short of cash, we conveniently dip into the cupboard, into the pile that we have actually stashed away for our children, to pay for the detergent powder just ordered or the cable guy knocking on the door unannounced.

    We promise ourselves to replace the money that we take from our children's future fund the very next day. Then the next day we forget, only to remember it late in the night, when we are off to sleep after a hard day at work and a chronic backache. We promise ourselves, "Tomorrow, for sure!" And then, that tomorrow never comes.

    Many tomorrows later, we wonder, "Where did all the money that we so painstakingly kept in the cupboard suddenly deplete or sometimes even completely vanish?

    If you thought that this was the only reason why cash should not be kept in cupboard, there are many more to come. As we have previously spoken about inflation, we can see how the money kept in the cupboard does not increase, inflation however does increase, and so do our dreams for our children.

    So how does the Rs.50, 000 which we painstakingly saved, help us when a few years down the line after taking into account inflation, results in actually worth just Rs.5000?

    In an age of plastic dolls and plastic money, cash becomes an outdated source. Mutual funds, bankers, etc prefer the cheque payment option. So, if you want to invest in an SIP, and let it mature in time for your child's education or marriage, it makes sense to keep the same money, which you would otherwise put away in your cupboard, in a bank where it is more secure and can also get you returns based on a rate of interest.

    A nugget of advice - Do not take cash from your husband too. Cash gets spent easily. Take a cheque instead. And a hefty one too! Deposit it and then use it judiciously by means of investments.

    And, at the cost of being repetitive, invest that money lying in the cupboard. Fixed deposits, stocks, mutual funds, anywhere but the cupboard!



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