Millennials require the best saving plan more than others. It is a myth that since they have time on their side, they can afford to consider investment options later on in life. While it is tempting to splurge on the good life and indulgences, it is equally important to build wealth for the future.
What Millennials Should Keep in Mind
Here are some aspects that millennials should note with care:
- It is important to start the best saving plan early on in life when you start working. Ideally, begin from 24-25 years of age or as soon as possible. This will help you benefit from the power of compounding over the long haul.
- You should gradually scale up your investment and savings component with age and increasing income.
- Make sure you have dedicated financial plans for your short-, mid-, and long-term needs.
- Do not deploy all your investments in a single asset type. It will be risky if this particular asset is affected by market fluctuations. Spread out or diversify your investments to minimize risks.
- Make a note of your income and necessary expenditures. Then, keep the lion’s share of the balance for savings and investments.
- First, save up at least 3-6 months of your net monthly income as an emergency fund. This can be partially distributed in a savings account and debt funds for maximum liquidity.
- Never compromise on financial security. Invest in suitable life coverage for yourself and your family, along with health insurance.
- You can then opt for a mix of investments like ULIPs and retirement plans to serve different purposes from the start.
- Balance your portfolio with low-risk investment options like PPF, fixed deposits, ELSS, and others as well.
How Your Savings Plans Will Help in the Future
The best savings plan for your needs is one that is tailored to help you achieve your life goals at various stages of life. The earlier you start, the better it is since you will benefit from compounding immensely. For example, if you invest Rs. 25,000 per month at an expected return rate of 10% over 25 years, then you will accumulate a corpus of approximately Rs. 3,34,47,259 (by investing just Rs. 75 lakh in this period). Bring this tenure down to 10 years, and you will get a total corpus of Rs. 51,63,801 with an investment of approximately 30 lakh.
Hence, as can be seen, starting later in life will not give you adequate funds that will help you cover goals like retirement planning, buying a home, weddings, higher education for children, and so on. Be prudent with debt to achieve your savings targets. Always repay credit card dues on time and try to keep unsecured debt to a minimum. Make sure you invest a minimum of 20-30% of your income and also use any lump sum bonus that you get for this purpose. Remember to also keep some money aside for discretionary and lifestyle costs as well.