Madam Lee’s daughter Alice is getting married soon. Puteri and Alice are excitedly talking about the plans.
Puteri paused to reflect, “Alice, at this crucial moment of your life it’s my duty as a friend to remind you about the importance of financial planning.”
No 15 – Decide between buying a new house or to rent
Puteri: “We can apply the Net Present Value (NPV) concept from Corporate Finance to calculate your net outgo less inflows.
If you buy a house, you need to put a downpayment and pay your monthly loan. In 10 years, you may want to sell the property.
If you rent, there is no downpayment, but your rent may be lower or higher than the monthly loan. In 10 years you won’t have an asset to sell.
We can compare these two decisions financially, and we can do scenario testing on the house price in 10 years.
No 16 – Gamify education on the importance of regular savings
Puteri: “We can apply the Binomial Tree concept from our Financial Models (Option Pricing) course. At each month you will choose to spend or save. We can expand this to cover a year, a few years and even up to retirement.
Then we can see the impact of starting to save earlier or later, the impact of stopping your savings for a few years etc.”
Alice: “Wow this is so cool and brilliant! Thank you Puteri!”
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