When you are young you are forced to do some things which you may or may not like. Like mugging up Kabir, mathematical tables, prayers, and of course all the English authors too.

You are too young to understand the import – but you mug it nevertheless. As you age you realize the meaning, and you are happy that you ‘mugged’ them and that you still remember it. Of course some of the things that you learnt are so nice that every year a fresh meaning appears. So you pass from 5 to 50 – and at various stages you have various meaning for the same poem.

If you were a conscientious student you of course learnt it well. If you were not so conscientious you did not learn it well, but you did some bit of learning. Similarly if you are generally a conscientious person you benefit by financial learning. If you are not, attending a Subra lecture is just a feel good. It does not result in investing, goal setting, etc.

That brings us to a very important thing – is financial literacy really useful for a non conscientious person? He knows that one should start early. It is just that he/she is not doing it. Like all of us know that getting up at 5 am and going for a walk at 5.30am is very good for our health. The question to ask is how many of us are doing it. Or are capable of doing it. KNOWING IS NOT SUFFICIENT.

Thus increasing awareness is fine, but what if a person is unable to or unwilling to act as per the teaching? I mean from his own point of view the training did not help. From the country’s point of view the time and effort made to ‘teach’ such people is a complete waste of time and resources.

So, should saving / investing be made compulsory? When your mother FORCED you to learn by rote tables from 1 to 20 you had no idea that these tables would be useful in class 7 when you are learning factorization. Similarly when you are being FORCED TO SAVE at your age of 23 you have NO CLUE about the benefits of starting early, compounding, not to interfere with compounding, etc.

So what looks like a dictatorial act, is beneficial for you at the age of 40 when you wake up to the reality that you have not done ANY KIND OF VOLUNTARY SAVINGS/INVESTMENTS. Thus I do think that in a country with no social security, Provident fund should be made compulsory and it should be locked in till the age of 55 or the demise of a person. Exception like critical illness should be allowed but people should not be allowed to withdraw for expenses or even buying a house.

Statman – an American has suggested this for the US. I am doing a cut paste of that recommendation. I do not see why it should not be implemented in India. Now.

  • Combined mandatory contributions by employers and employees at a minimum of 12% of salary (equal to Australia’s target).
  • To be administered by NPS.
  • Default investment options would be other indices.
  • Fees of no more than 30 basis points (0.30%).
  • No borrowing from retirement savings accounts before retirement age (I like this one).
  • Enhanced financial literacy through education at high schools and elsewhere (this one is important as well).

Currently many companies in the organized sector are not registered for Provident fund – I have no clue how and why. If it is really compulsory, how are they avoiding Provident fund?




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  1. too many people on this blog trying to get traction for their blogs? ha ha..been seeing that for years now!!

  2. I definitely agree with sir. For a country with no social security and near to zero awareness about retirement planning, compulsory saving norm is required. Also a course on personal finance must be included at least at the college level irrespective of the stream students take.

  3. sir necessity is mother of invention
    you cannot force anything it is waste. horse will drink water automatically if it is thirsty.

    unless there is some serious requirement people wont change it is basic human psychology

    it is very natural for young people to enjoy (when you will enjoy if not in youth ?)

    only when you marry get more responsibility you start looking how to grow income etc.

    i am betting everyone reading your blog one day woke up and realized change is necessary.

  4. For personal finance I think, what suits better is

    Necessity is the mother of FREEDOM,

    Bcoz, Necessity never made good bargain.

    This is something very much missing mostly from early age.

  5. I think many large co’s have outsourced their PF to pension plans of insurance co’s, few of them have their own PF trusts too.

    I think as a society we never were taught financial literacy, savings were glorified not investing. The communities who understood investing have generally done well.

    Imaging if PF was not compulsory ? Many people i know who are now retired would be at the mercy of their children’s income. So compulsory is already there we need equity investing compulsory of around 10-15% minimum and max to be decided by the investor.

  6. PF is compulsory if a company has 25 or more PERMANENT employees. This is a loophole which I have seen many tech companies utilize. (I don’t know about other industries but tech can not be the only example).
    A lot of people (read employees) also prefer more salary in hand vs going to PF.
    If you have to ever deal with EPF employees, then it is not a surprise that people don’t want to deal with them.

  7. Any kind of compulsion by any authority will always face criticism (however good the intention may be). People do not want any compulsion (good or bad). Ironically, the people who may create ruckus over such compulsions will most probably have nothing to do with the order.

  8. I would prefer if it were not forced.
    As others mentioned, necessity is the mother of invention – people will learn and appreciate/assimilate the solution to a problem only if they face it.

    Others harping on about personal finance course and all that – compound interest is introduced in ICSE syllabus in Std 6-8 [do not recall exactly] – how many ICSE students once they become an adult follow the compound interest concepts in life/investing?

    On the flip side, do schools teach you to take bribes, be rude to others, be generally an a*hole – I think not; but most Govt [State or Central] employees are one or all of the above.

    Inflating the syllabus of kids or generally forcing people to do something wont yield any positive result.

  9. Provident fund is forced, and I do think it is a good idea till a person’s salary does not exceed say Rs. 20Lakhs. Make it voluntary after that.

  10. “class 7 when you are learning factorization” – nowadays they are doing it in class 4!!! a different matter that it does not make sense at either point…

    PF exemption – the clever way companies avoid this is by making employees aware that they have a choice to opt out (majority are now above the cutoff level) & increase ‘take-home’ – thus reducing their own headaches of dealing with PF dept 🙂

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  12. Hi, very informative article.
    I am a prospective investor and was looking for profitable options to invest. I wanted your views about Peer to peer lending and is it a viable option to invest?

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