Millennials, the demographic cohort that makes up 34% of the country’s population, have had a ringside view of the world’s digital transformation. Their needs have expanded to fit their here-and-now approach to life, and so have the means to satiate those needs. Whether it’s a mundane task or a significant life decision, convenience comes as second nature to them. While the world may be at their feet (or fingertips), there’s no denying that it has also led to an information overload in all aspects of life today, including personal finance decisions.
Financial literacy has become more important than ever, all thanks to the uncertain times imposed upon us by the pandemic. But it’s equally important to be able to cut through the clutter and make informed navigation through financial planning. FinTech has certainly helped make finance more accessible and also relatable for the Millennials today. There are several funds aimed to provide millennial investors with the right launchpad into the world of wealth creation. Let’s take a closer look at how Millennials can go about their personal finance planning.
An early headstart to maximise returns
The rule of thumb to gain maximum returns on one’s investments is to start early. This is the smartest way to grow your savings and attain a sizeable corpus to meet your life’s milestones. Millennials have the time factor on their side that they should leverage and get an early headstart on their investments. Inflation is soaring at a brutal pace and currently clocked a 17-month high at 6.95% last month. Your child’s higher education might seem far off, but add another 20 years to this hike and factor in education inflation which stands at 11-12% right now, you’ll need at least Rs 1 crore to afford the college fee.
Therefore, every day that you delay translates to this cost going up and a loss of returns. The financial sector has taken cognizance of the need to make investment 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 he or she turns three months old. Besides this, investing early for yourself will also pay you off in your old age, eliminating the need for dependency on anyone.
The growing need for a resilient financial strategy
Millennials love to live in the moment. However, the stress of the modern-day 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 grown manifold for an average Millennial. The key ingredient to safeguarding yourself and your loved ones from such uncertainties is insurance. Health emergencies are on the rise like never before, and on top of that, towering medical inflation only adds to this threat. The life of a Millennial is punctuated with a stressful but sedentary lifestyle, thereby speeding up the arrival of diseases like diabetes, hypertension and heart ailments. As per 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 one medical exigency is enough to wipe out your hard-earned savings, it’s wiser to invest in a resilient financial strategy that prepares you for better for such a scenario. This applies to having robust coverage through both, health and term insurance. The most common misconception that Millennials have is that do young people even need insurance?
The answer is a resounding yes. As per the Indian Heart Association, heart diseases strike Indians at an earlier age than other demographics without any warning. Insurance shields you at every stage of your life. In fact, the earlier you buy, the better it is. Aside from saving more, you also get a policy with varied features easily, which might get difficult once you contract a disease or get older. Insurance should be a Millennial’s primary investment in order to protect all the other investments.
Leverage the power of diversifying and compounding
The market is inundated with a myriad of investment options. Picking the right investment tools to park your money is crucial, but can also be challenging. Therefore, you should deploy the strategy of portfolio diversification here. Market volatility, inflation, fuel price rise – there are a number of factors that control the market. So, you should look at options that adequately cover you for risk as well as reap sufficient returns. Depending on your life’s stage and needs, you can tap into the power of compounding by investing in products that give you the upside of market-linked returns. You also need to allocate your funds proportionately into debt and equity. There are several options that allow you enough flexibility to switch between the two as per your needs. However, if you are a risk-averse investor, you can still get good returns by investing in products that guarantee a fixed income and fixed returns on investments over a certain period of time.
Digitisation has made investment a lot easier for the Millennials, so it’s important to gauge the strengths and weaknesses of every option. It’s important to start working backwards today to accomplish your financial goals tomorrow.
Views expressed above are the author’s own.
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