Father Sez

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Yet another reason why it pays to be financially literate

Wednesday November 19th, 2008 by fathersez

dy/dx Ben was the nick name given to a good friend Ben from my campus days. Ben was an Arts or Economics student, I think. (He is now a proud holder of a Masters Degree in Law). I still remember vividly Ben telling us about some exam he had sat for, where his brains just fried, emitted smoke and froze when he saw questions like x + 3x – 4 x = ?  

I think that was when I first realised that not all of us are wired the same way. Having attended Science stream in school, questions like these would have been no problem for me or any of my classmates.  

Apparently it was not the same for those of us from non numerate backgrounds.  

This fact struck home again a few weeks ago. 

I saw an advertisement in the local papers about a 3 hour seminar designed to teach us the secrets of tremendously reducing the interest we pay on our mortgages and at the same time shortening the time.  

The first thing that came to my mind was that these guys will probably tell us to pay over and above the minimum payment which would reduce the interest and the period of the loan.  Still my curiosity got the better of me and I signed up. The amount to be paid was very small and I thought the coffee break and the cookies that went with it would cover the cost anyway. 

There were almost 50 of us that day, all eager to find out about this secret. As expected the presenter showed some fancy charts, and finally came to the point that additional payments would reduce the interest and the period. He then struck some uncertainty in us by saying that since most of us would not have read the loan agreements in detail, just making the payment was not enough. And his company offered the service (for a small fee) of analysing the loan agreement and to ensure that the additional payments were properly allocated by the Bank. 

Then came the invitation for people to sign up, and many of the attendees did. 

I wondered as to why we could not read the loan agreements ourselves and settle this. Why should we need to pay for these services?  

The answer is that not all of us are wired the same way. 

Some would have figured this MR trick all by themselves. Others would need some prodding, and then they would be able to figure it out. And yet others would remain baffled despite the prodding and would need someone to sort it for them. 

I think this is yet another reason for us to be financially literate. And those of us from non financial educational backgrounds should for our own good, make a strong effort to get ourselves a little educated financially.    

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