More than 60 percent of the workforce in the country by the year 2021 will comprise of the ones below 30 years of age. Another aspect of this demographic dividend is the spending, saving and investment pattern and habits of these millennials. Investment determines how an economy performs in the long-run, besides providing returns, in the way of interest earned, to the one who invests. The question is, ‘Is the youth saving enough for a safer tomorrow,’ or in other words, ‘Is the youth investing enough to help the economy tread in the green zone in coming years’?
The concept is simple, when you save, or much better (as not all savings earn you interest), invest, you not only insure your future but also play a small yet crucial part in pushing the engine of growth as businesses depend on these savings for financing their expansions and diversifications, finally resulting in creation of more jobs in the market and surge in all other economic activities.
That said, the key question is ‘Where should the youth save’? Let us take a brief note of available investment prospects for the youth.
Build an emergency fund
Before going ahead with investing your money, it’s highly important to build up an emergency fund. As the name suggests, this fund helps you finance an emergency. It also helps to survive in case you lose your job or earnings go haywire. We suggest keeping money approximately equivalent to 6 months expenditure in your bank current account.
Take insurance
Life insurance is an assurance that your nominee shall not undergo avoidable financial stress in case of a mishap. Along with LIC, many private companies provide life insurance policies; here the subscriber also has the chance to earn some return from the investment decision of the insurer that further invests subscriber’s money in other market instruments. In this regard, the recently introduced state-backed social security schemes PMJJBY and PMSBY are an inexpensive and good option to go for even when one invests in other insurance plans at the same time.
Start planning your retirement
No matter how strange it sounds at 25, but this is one of the most important aspects that you need to start taking care of if you are envisaging a smooth life after retirement. The earlier you start, the better it is as you need to invest less to build the same corpus. Another advantage of starting early is the freedom to take risks. For E.g., you can put a larger chunk of your investment in stock market or equity mutual funds (Also read: Why Mutual Funds, And Which One) which though risky, give a higher return. In case one has a low-risk appetite, the money can be invested in relatively safer avenues like debt funds, which invest in government and corporate bonds, Public Provident Fund or Employee Provident Fund.
Fixed deposit + stock market
Now, we come down investing the money to earn additional income and also to add to the wealth. There is no thinking twice that traditional investment options like fixed deposits and PPF accounts deserve the due attention of millennials. You can start with just few hundred rupees. A PPF account dem ands deposits of as low as INR 500 on an annual basis and offers a h andsome rate of interest and tax benefits. Life and health insurance, mutual funds, pension schemes, all deserve consideration. At the same time, do not forget to explore the elephant in the room, the stock market that has no predetermined limits in terms of return to investors. At 25, one has an advantage of higher risk appetite and hence can put money in riskier avenues to earn a greater return.
Also read: Are fixed deposit your safest bet
Stock market products have been termed the best buy today owing to strong fundamentals of Indian economy. Nifty and Sensex are hovering at their all-time highs, all because business sentiments are great. But thesad underlying fact here is that the retail participation in shares and bonds has still not reached a level where both investors, as well as businesses, should grow together; hence an untapped opportunity, but not so if tech-savvy and informed millennials jump into action. Thus, it is a great time to start investing in the stock market either directly or through mutual funds/systematic investment plan to earn more.
Always remember, the one who saves is wise, who invests wiser, and who invests wisely the king of all.
The author is a direct taxation expert and works with a reputed chartered accountancy firm in Indore.
Disclaimer – The views or opinions expressed in the article are the personal opinions of the author and do not in any way reflect the views of Suvipra. Suvipra does not assume any responsibility or liability for the same.
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