School days are meant to be fun. Many of us look back on our school days as the best days of our life, where friendships were forged and life lessons learned in the school yard.
Most of us would have learned English, History and Maths, and if you’re anything like me, you probably wondered how much of those subjects would actually be used in real life. Wouldn’t it be great if school taught us real life skills that we would go on to use every day?
Thankfully, there are some schools now, which, apart from the regular subjects included in the syllabus, schedule time for teaching life lessons like budgeting, family planning, leadership skills and the like. Since it is now too late to re-enroll ourselves in such schools, we have come up with Three vital financial lessons that one needs to learn. These are the things you wish your school had taught you in your childhood.
You probably learned in your Maths class that interest is a part of a formula used for calculating profit and loss. But have we ever learnt what interest actually is and how it is perceived and applied in the real world? No. In simple words, interest is a sum that the borrower has to pay in order to obtain a loan.
The interest is generally paid as a percentage of the total amount lent and is charged on a monthly basis as well. Further, there are two types of interests – Fixed and variable. Fixed interest remains constant throughout the repayment period, while variable interests may fluctuate during the repayment period.
The application of interest and its compounding benefit is often felt by younger people when they first sign up for a Credit Card. If only they were taught that making only the minimum monthly payment is a recipe for financial disaster.
Just like managing a Credit Card, setting and keeping to a budget is a skill that also requires discipline. There are two phases in budgeting – the easy phase and the difficult face. In the easy phase, you have to just classify your monthly expenses and allocate money from your income accordingly. Where it becomes difficult is the part where you need to stick to that budget set.
Many people consider that the best way to ensure you stick to your budget is to allow an amount for discretionary spending on occasional treats such as an evening out, coffee with friends or new clothes. Just like allowing yourself an occasional piece of chocolate when on a diet can help make it easier to follow.
We all go to bed with a belief of waking up the next day morning, but life is unpredictable and we never know what will happen next. So it is up to us to take necessary actions and steps for the betterment of our family. Insurances, such as home insurance, car insurance and personal insurance (such as life insurance and income protection) allow us to prepare for the worst case situation, whilst still expecting the best.
Insurance makes sure that you can plan for your tomorrows without the fear of accident or illness derailing those plans.
With underinsurance endemic in Australia, it is imperative that Australians become better informed about their insurance needs.