Khushi and Joy go for a hike.

It was a rainy Saturday night and Khushi and Joy slept with their fingers crossed. “Please God, may it rain lots in the night but please give us a clear morning.” prayed Khushi. She checked the weather forecast before she went to sleep. Their parents had planned a hiking trip for the weekend. Khushi was particularly excited, as it was the first time that she would go hiking. The destination was about 60 km away from their house.

When we have an exciting day planned, we tend to wake up earlier than our usual time. Well, Khushi did the same and peeped out of the window as soon as she woke up. She leapt with joy seeing clear skies and no sign of rains. The trip was on!

Joy and his family joined Khushi and her family in their car. They wanted to enjoy the journey as much as the destination, and how would that be possible without carpooling? Joy seemed to be equally excited. “Hey Khushi, so the day has come. Both of us have been waiting for it all of last week!”, said Joy.

Though Joy and Khushi are school-going students, they have cultivated a habit of doing a little research about the places where they’re going to, and preparing for their journey in advance, with little or no help from their parents. They maintain a travelogue and update it from time to time.

Once they reached the base camp of the trekking expedition, they spread out a huge mat and opened their food baskets. It was breakfast time. They preferred home-cooked meals over eating outside. In fact, the kids had prepared a few dishes that could be prepared without any cooking! They were elated to have their breakfast as they saw the sunrise, and heard the birds chirp, amidst the lush green surroundings.

Joys dad came me up with something interesting as he held on to his sandwich. “Cheers to a wonderful morning!” he started
“What a place to have breakfast amongst the best company of friends and nature!” Everyone nodded in consent. “Let’s make this
experience a little more interesting – Khushi and Joy, while all of us enjoy this trip, I would like you to click a lot of photographs and observe whatever you can. Once we reach home, I want both of you to write a blog about this trip.”

Wow! This came out of nowhere! Both of them started wondering. “Are we capable of doing this? Do you think we can?” asked
Khushi. Joy was as calm as ever and said “Without a doubt! We just read a few blogs last week and most of them were written by people older than us – they wrote about this place and also stated that it is kids-friendly. However, we did not come across a blog written by anyone who is of our age. Let’s give it a shot!”

As all of them moved up the rocky hill, Joy understood what his father was trying to communicate. Everyone reached home after enjoying the experience. On the next day, after a good night’s rest, it was time to start working on the blog post. Khushi and Joy wrote a very thoughtful post about their hiking trip. Their blog included everything that anyone would want to know about the hiking trip. They had included a list of things that they had packed for the trip, the time that it took them to reach there, as well as reach home, about the traffic on the way, the wonderful meals that they had in the midst of nature and more. Infact. they kept a track of how many steps it took them to reach the top versus the number of steps their parents took. They observed that their parents would complete the hike faster since they were capable of taking larger steps. They selected the best of their photographs on the blog.

Joy’s dad was glad to read such a wonderful blog. He shared it with his colleagues, and they shared it with more people. Soon, everyone was referring to their blog to know how to prepare for the hike, and what to expect from it. Joy’s father said, “I am impressed that both of you have written such a detailed blog about the hike. The same kind of preparation holds good for financial decisions that you make in life. It is important to understand what you want, why you want it, and how will you get it.”

As a reward, Joy asked his father for a new bicycle since he did not like his bicycle anymore. The new bicycle would cost Rs. 20,000. Joy’s dad did not like the idea of buying a new bicycle so soon, since Joy’s current bicycle was in very good condition and he had a few other financial commitments. He did not want to refuse, so he asked Joy to save Rs. 10,000 for the bicycle from his pocket money, and once Joy would save the amount, his dad would contribute the remaining money to buy him a bicycle. Joy’s dad asked him to find out about the 50-30-20 rule.

Joy started calculating:

He got Rs. 2000 as pocket money per month. So it would take him 5 months to accumulate Rs. 10000, even if he did not spend a single rupee. But he has to spend a little bit on basic expenses, and some money when he goes out with his friends, and he saves some money per month. Since he wanted to buy a new bicycle, he decided that he would save 20% of his pocket money, spend 30% for his wants, and spend 50% for his needs, as per the rule.

Therefore he would

Save 2000*(20/100)= Rs.400,

Spend 2000*(30/100)= Rs. 600 for his wants

Spend 2000*(50/100)= Rs. 1000 for his needs.

This way he would save Rs.400 per month and would need 10000/400 = 25 months, or more than 2 years to buy a new bicycle.

Joy understood that his dad cleverly delayed his demand for a new bicycle for a few months. He understood that his dad wanted him to understand the value of money, but he wanted the bicycle as soon as possible. To know what Joy did next, stay tuned for our next blog.

(Sneak-peek: He got the bicycle in less than 25 months)

Author: Mr. Nirmal M Jain | Mr. Nirmal M Jain is a Co-Founder at HappyWise Financial Services. He has helped over 100 Families over the last 15 years of his services in the Financial Planning Sector. He has been a mentor to several people to help them better understand investments, stocks, mutual funds, financial planning, personal finance and above all his favourite term “The Power Of Compounding!”.