Financial Tips for Young India

Unaware and unsuspecting, the young are rarely ever in for long term financial planning. Financial literacy means to have enough skills and knowledge to make informed choices regarding your own resources and incomes. That sounds simple enough, right? Well, the statistics here disagree. The RBI recently had to launch the National Strategy for Financial Education (NSFE) 2020-25 with the aim of inculcating financial literacy concepts amongst people, encouraging their active savings behaviour and boosting participation in the financial markets. Why, you ask? Well, because as per the RBI, only 24% of the Indian population is financially literate (2020). Which might look good when compared to the 15% financial literacy rate in 2013, but is still abysmal overall.

Given our aim of becoming a $5 trillion economy by 2026-27, it is needless to say that better financial planning by youngsters will play a major role. It isn’t an easy feat today to land yourself a well paying and satisfying job. The cut-throat competition combined with a booming population and rising unemployment implies a decrease in the overall financial security for the common man. Basically, the more we talk about this, the more obvious it becomes that financial literacy is not an option. Hence, without further ado, let’s talk about a few simple tips that youngsters today should be aware of:

  1. Make budgets – Not always to limit your spending but in fact to analyse them. Once you start maintaining budgets, you will invariably start recording your expenses. And when that happens, you might find out that that one trip to dominos that you thought will not make a difference, will make it when combined with the ten other trips to McDonalds, Pizza Hut, Subway, etc.
  1. Buy an Insurance – If you have any dependants at all, you must buy an insurance. And not just any insurance, a term plan. A term plan has the highest pay out than any other kind of insurance. It ensures that if someday you don’t come back home, your family doesn’t have to combat financial distress along with emotional pain.
  1. Invest mindfully – If you are young and investing for yourself, you can invest in equity for long term. But if you are giving advices to your parents or the elderly, please do not impose your risk appetite on them. Ask them to invest in fixed income (debt) securities, which will prevent capital erosion at a time when incomes are anyway either unstable or about to inadequate.
  1. Don’t rush to become the next Wolf of the Wall Street – Many young people are overly inspired by fictional content promoting rash risk taking in the stock market. DO NOT DO IT. If you do not know how to invest yourself, invest in SIPs (Mutual funds) after taking advice from knowledgeable folks. SIPs are monthly investments you make of small amounts (Can be as small as ₹500). Investing regularly equips you with the power of compounding and helps you ride out the peaks in the market and enjoy a good average return. TAKE ADVICES.
  1. Invest when the market is down – Instead of panicking and rushing to exit, invest more in the lows. Since the markets are bound to bounce back eventually, investing at the lows ensures that you earn sizeable profits even if you sell off before the stock reaches its highs.
  1. File taxes – Even if you do not have a taxable income, FILE TAX. Get a PAN Card and start filing tax returns of Nil amount. Why? Because it builds your credit score (making you more trustable in the eyes of financial institutions like banks). What’s the point? Well, it makes it easier for you to get a loan in the future if you end up needing one. It also makes it easier for you to get a credit card.
  1. Amortise your loans – Loan amortisation is basically trying to restructure your loans to bring down the overall interest obligation. Most people don’t know this is possible, but for someone with financial training, it’s extremely simple. In fact, with a little knowledge of MS-Excel and a few YouTube tutorials, you can do it yourself. Though, I would advise to get an expert involved.
  1. Lease or buy decisions – A lot of investments today are based less on our needs and more on social conventions. So, before you take that home loan or car loan, ask yourself if you really need it. If you don’t, just rent it and move on. Take in consideration your lifestyle choices and other financial goals.
  1. Build a retirement fund – India DOES NOT have social security. You’re on your own after you retire. If you’re lucky enough to have a pension, you still might not be lucky enough to have that pension cover all your expenses. What with the rising inflation and the medical expenses? Plus, all those travel plans you keep postponing till “when I have more time”? When will you go on those trips if not after retirement, when you’re FINALLY free?
  1. Read – I cannot stress this enough. You DO NOT need complex economics, accountancy and taxation knowledge to be financially literate. You DO NOT need a degree. All you need is probably a newspaper. That’s it. Read that and you’re done. Don’t make excuses by saying “Oh, but I wasn’t a Commerce student”. It really doesn’t matter if you were! Almost all skillsets today can be developed with the help of the internet today. So, get off Instagram and Twitter and consume knowledge instead of memes.