In today’s ever-changing world, the younger generation is faced with challenges and opportunities when it comes to managing their finances. Navigating through a sea of information and an abundance of choices, young individuals find themselves in a pivotal position to equip themselves with the necessary knowledge and skills that will enable them to make sound financial decisions. As a parent, it is our responsibility to educate them on money handling.
Below are some passed-down tips for young adults on smart money management that are imperative for parents to share with their young ones:
Save and budget early
Remember the piggybank you had as a child? Whenever you received money as a gift, you would put it in the piggy bank. It is important to continue this habit of saving and managing your budget to spend on some of the things that you planned to buy for yourself. This inculcates a practice of saving effectively to be able to afford something you like and build patience to wait for the right time and savings before you spend. This also helps in impulsive buys as with the passage of time you may not feel the same need for the stuff you wanted to purchase. Starting early and developing good saving habits can set you up for financial success later in life.
One way to start is by budgeting your monthly expenses and sticking to it. By tracking your expenses and cutting unnecessary costs, you can free up more money to put toward your savings and financial goals. Start early, budget wisely, and watch your savings grow over time. Also, it is pertinent to be patient with the investments as they tend to show results over a longer period of investment only.
Start investing
To secure your future financially is to start investing early in life. Investing even a small amount every month can help you accumulate significant wealth over time.
It is crucial to choose the right investment option that matches your financial goals and risk appetite. One such effective investment option you can consider is a Unit-Linked Insurance Plan (ULIP), which offers the benefits of insurance coverage and market-linked returns. It enables you to invest in a mix of equity and debt instruments, allowing for potentially higher returns over the long term. Starting early can provide you with a head start in building a substantial corpus of wealth over time.
Take the time to assess your financial goals and choose an investment option that aligns with your objectives. Even a small amount will create a healthy corpus over a long amount of time. You may also take your parents help for part contribution.
Get health insurance
Health is wealth, and this couldn’t be truer when it comes to financial planning. It is extremely essential to have a health insurance plan that caters to your specific needs. A health insurance plan ensures that you receive timely medical attention without worrying about the high cost of medical care. When choosing a health insurance plan, make sure it caters to your specific needs and provides adequate coverage. Remember that your health is your most valuable asset.
Get life insurance to protect your child’s future
When you grow older and decide to have a child of your own, life insurance can help you protect their future in case of any unforeseen circumstances. It can provide a financial safety net for your child’s education, daily expenses, and other needs.
One option to consider is a guaranteed insurance plan, which offers a lump sum payout. With a guaranteed insurance plan, you can be assured that your child will receive the necessary financial support, even if you are not around. So, take the time to research and choose a life insurance plan that provides the right coverage for your child’s future.
Align your investments with your financial goals
You need to plan your investments based on your financial goals. Goal-based investment involves setting milestones such as buying our own house, a jewelry set you like, or providing for your future child’s education, financing your dream of globe-trotting, comfortable retirement, etc., and aligning your investments accordingly.
It helps you create a structured investment plan like, SIPs, RDs, ULIPs or GIPs and make informed decisions. You can achieve this by identifying your financial objectives, assessing your risk appetite, and choosing investment options that align with your goals. A well-planned investment strategy coupled with consistent contributions can help you build substantial wealth over time to fulfill all your goals.
Plan for retirement to ensure a stress-free life
It is essential to start planning early and save enough to maintain your standard of living even after retirement. One way to achieve this is by investing in retirement-focused plans, such as a pension plan or a retirement fund. These plans are specifically designed to help you accumulate wealth over the long term and provide a steady income stream after retirement. So, start planning early and choose an investment strategy that aligns with your retirement goals.
As Robert Kiyosaki said, “Money without financial intelligence is money soon gone”.
By following these financial planning lessons, you can ensure that you make informed decisions as every small step you take today can lead to a more prosperous tomorrow.
-The author is head of people function, Aviva India. Views expressed are personal.
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