Every specie on this planet earth has a life cycle. We humans are no exception. We also have a life cycle and within this life cycle we pass through different life stages. There are certain responsibilities which we perform at each life stage and somehow most of these activities are related to money. Let’s see our life’s connect to money and how it impacts our life cycle.
I. Childhood and Education
We remain in this life stage for approximately 20-25 years (from birth till graduation/post-graduation). Though we don’t earn money here, but our life is quite dependant on the kind of money our parents earn. Money lessons learnt from the surroundings in this stage form the foundation of our money behaviour going forward.
II. Career Development
This is the stage where we get directly connected to money. In the beginning of this stage, most of us splurge, party, and enjoy our earnings as we are accountable to none. People who understand savings at this stage are clearly the winners, because they will save more money due to early beginner advantage and it will have compounding effect on the savings as well.
III. Family Formation
In this stage we get married, have kids, buy house, etc. This is the stage where most of us have dependants – wife, kids or even old parents. There are also needs like house hold expenses, medical expenses, kids school fees, parent’s medical expenses. At this stage we truly get to worry about future and start saving for kid’s college, our retirement, contingency planning, and tax planning. People who have prudent planned savings at this stage can catch up with the early savers.
IV. Pre-retirement Phase
This phase is the best monetary phase for most of us. Here, the kids are already into their jobs, most of the debts are paid, and most of the people are at peak of their careers. This phase gives the maximum surplus to invest for retirement needs. It is a very important phase to create an emergency health corpus other than the health plan to cater to health needs in case of an unforeseen illness.
This is the final destination. We all have plans for retirement. This phase makes us realise the value of all the savings done earlier in our lives. But, not all of us retire, some of us still work in areas of our interest may be for full-time or part-time, which provides cushion to the retirement corpus and might add on to the legacy corpus.
In all the life stages, money forms an important factor that cannot be ignored. The earlier we teach our kids about money management, the better it would be for them as it would help them define good relationship with money for all their lives.
Charu Hastir, CFPCM is founder of http://www.theriteplan.com/. Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/