What millennials need to know about personal finance planning

Millennials, the demographic cohort that makes up 34% of the nation’s population, have had a front-row view of the world’s digital transformation. Your needs have expanded to fit your approach to life in the here and now, and so have the means of meeting those needs. Whether it’s a mundane task or an important life decision, convenience comes naturally to them. While the world may be at your feet (or at your fingertips), there’s no denying that it has also led to information overload in all aspects of life today, including personal financial decisions.

Financial education has become more important than ever, all thanks to the uncertain times imposed by the pandemic. But it’s just as important to be able to cut through the clutter and navigate your way through financial planning. Without a doubt, FinTech has helped make finance more accessible and also more relatable for today’s Millennials. There are several funds aimed at providing millennial investors with the right launch pad into the world of wealth building. Let’s take a closer look at how Millennials can plan their personal finances.

An early head start to maximize returns

The general rule of thumb for getting the most out of one’s investments is to start early. This is the smartest way to grow your savings and build a sizable corpus for your life milestones. Millennials have the time factor on their side that they need to take advantage of and get a head start on their investments. Inflation is rising at a brutal pace and currently hit a 17-month high at 6.95% last month. Your child’s higher education may seem far away, but add another 20 years to this increase and take into account educational inflation which is running at 11-12% at the moment, you will need at least Rs 1 crore to pay for the university fee.

Therefore, each day of delay translates into an increase in this cost and a loss of profitability. The financial sector has realized the need to make investing simpler and more relatable for Millennials now. Even if you set aside Rs 10,000 every month for investment, you will be able to achieve your financial goals over time. In fact, whether or not you have a family right now, you should know that you can start investing for your child as soon as they turn three months old. In addition to this, investing early for yourself will also pay off in your old age, eliminating the need to depend on anyone.

The growing need for a resilient finance strategy

Millennials love to live in the moment. However, the stress of today’s lifestyle is a harsh reality for them that casts the shadow of its consequences on their future. Especially after the Covid outbreak, the need for a financially secure future has multiplied for an average Millennial. The key ingredient in protecting yourself and your loved ones from such uncertainties is insurance. Health emergencies are increasing like never before and furthermore the huge medical inflation only adds to this threat. The life of a Millennial is marked by a stressful but sedentary lifestyle, which accelerates the arrival of diseases such as diabetes, hypertension and heart disease. According to the International Diabetes Federation, every 1 in 12 Indians is diabetic, which is the second highest number in the world.

It is often said that the best time to buy insurance was yesterday, the next best time is today. At a time when even a medical need is enough to wipe out your hard-earned savings, it’s smarter to invest in a resilient financial strategy that better prepares you for such a scenario. This applies to having solid coverage through health and term insurance. The most common misconception Millennials have is that young people need insurance?

The answer is a resounding yes. According to the Indian Heart Association, heart disease strikes Indians at an earlier age than other demographic groups without warning. Insurance protects you at every stage of your life. In fact, the sooner you buy, the better. In addition to saving more, you also easily get a policy with varied features, which can become difficult once you get sick or get older. Insurance should be a Millennial’s primary investment to protect all other investments.

Leverage the power to diversify and capitalize

The market is flooded with a myriad of investment options. Choosing the right investment tools to park your money is crucial, but it can also be challenging. Therefore, you must implement the portfolio diversification strategy here. Market volatility, inflation, rising fuel prices – there are a number of factors that control the market. Therefore, you should look for options that adequately cover you for risk and earn sufficient returns. Depending on your stage of life and your needs, you can harness the power of compounding by investing in products that give you the advantage of market-linked returns. You must also allocate your funds proportionally to debt and equity. There are several options that allow you enough flexibility to switch between the two depending on your needs. However, if you are a risk-averse investor, you can still earn good returns by investing in products that guarantee a fixed income and fixed returns on investments over a certain period of time.

Digitization has made investing much easier for Millennials, so it’s important to gauge the strengths and weaknesses of each option. It’s important to start working backwards today to achieve your financial goals tomorrow.



The opinions expressed above are those of the author.


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