In the wake of a tragic incident where a young engineering student took his own life due to loan app harassment, it's essential to understand the value of teaching responsible spending habits.
In a heartbreaking incident, a 22-year-old engineering student in Bengaluru took his own life allegedly due to harassment by recovery agents from loan apps. This tragic event highlights the need to educate young individuals about personal finance and instil responsible financial habits from an early age. Parents play a crucial role in equipping their children with the necessary knowledge and skills to navigate the pitfalls of the loan culture.
Here are three financial discipline lessons and guidance to safeguard young minds from falling victim to such circumstances.
Lesson 1: Understanding The Four Pillars Of Financial Life
Children should be introduced to the four pillars of financial life: income, expenses, assets, and liabilities/loans. Each post has its relevance in achieving financial stability. It's not solely about income but also about spending habits and managing debts.
"One lands in a debt trap when the income falls short in paying for the EMIs, and the interest keeps piling up on the outstanding amount. Before one realizes the depth of the damage, the debt situation spirals out of control," explains Arijit Sen, Sebi-registered investment advisor and co-founder of Merry Mind, a Kolkata-based financial advisory firm.
Lesson 2: Developing Responsible Spending Habits
Teaching children responsible spending habits is vital in preventing them from falling into a debt trap. Parents should encourage their children to live within their means and avoid impulsive borrowing.
"Parents should inculcate the discipline of spending as per the budget and staying within the budget. Parents should encourage children to wait till they save enough to buy whatever they want instead of taking loans at the drop of a hat," advises Suresh Sadagopan, founder and principal of Ladder7 Financial Advisories, a financial planning firm.
Lesson 3: Building Assets And Managing Liabilities
Instilling the importance of building assets and managing liabilities can help children develop a strong foundation for their financial future. This includes understanding the risks of borrowing and the value of saving and investing.
"It is unfortunate that a person has committed suicide. But the person who has taken the loan is a 22-year-old educated adult who knows what a loan is, the interest to be paid, etc. If he defaults, loan providers will follow up, which is natural, though any aggressive behaviour or intimidation on the part of the loan recovery agents cannot be condoned," highlights Sadagopan.
Abhishek Kumar, founder and chief investment advisor at SahajMoney, emphasizes the importance of leading a life within means. "Losing one's ward is the hardest thing to experience
for a parent. So parents should try to instil two things early on with their kids: a) comfort to share bad news and b) leading life within their means," he adds.
The tragic loss of a young life due to loan app harassment underscores the necessity of teaching financial discipline to children. By understanding the four pillars of financial life, developing responsible spending habits, and managing assets and liabilities, young individuals can avoid falling victim to the perils of the loan culture. Parents have a crucial role in imparting these lessons and empowering their children to make informed financial decisions. Let us prioritize financial education and equip the next generation with the necessary knowledge and skills to navigate the complex world of personal finance.