In this digital era, we are bombarded with information and investment options. The recent years of uncertainty with the pandemic have made millennials realise the importance of savings and planning for the future. According to the ‘Consumer Spending, Sentiment Index Report’ by InterMiles, nearly 70% of Indians have increased their savings since the onset of the pandemic. Investing and financial planning are essential to thrive in a world full of uncertainties, increased competition, and inflation.
Millennials face many difficulties that probably their older generations have not, such as high rental costs (especially in metropolitan areas), higher professional aspirations, etc. Thus, their requirements are more than the older generations for which proper planning is necessary. This is where financial planning plays an integral role. The PGIM India Mutual Fund Survey of 2020 states that about 51% of urbanised Indians do not have proper retirement planning. According to the findings of the Deloitte 2020 Millennial Survey, about 80% of urban millennials are concerned about their monthly budget and finances on the whole. That is why proper financial planning is essential for millennials.
Financial planning is a process of achieving financial freedom by identifying your goals and investing your hard-earned money in the right way to achieve them. Here are some important tips for financial planning for millennials.
Be it a short-term goal like creating an emergency fund or a long-term goal like retirement planning, financial planning includes everything needed for a successful financial journey.
Evaluate your risk appetite and risk profile to choose the right investment options. Create a diversified investment portfolio to achieve your financial goals.
Financial planning is even more crucial for millennials, given their fast life and higher disposable income than previous generations. Even though millennials have adopted the major advancements in technology, they must stay prepared for uncertainties ahead by planning finances and securing their financial future.
Most millennials would now be planning for their first home, starting up a new business, or for their children’s education. Considering the distinct financial goals, saving habits, and challenges faced by the millennials compared to the previous generation, it is important for millennials to realise the importance of investments as they are close to their peak earning years ahead.
Instead of keeping the funds idle in the bank account, you can invest in liquid mutual funds that offer you some reasonable return and are a safe alternative. Be adequately insured: Insurance needs to be part of your financial portfolio for the overall well-being of yourself and your family. Adequate health insurance would protect you from any medical necessities. In contrast, life insurance would protect your family from any financial stress if any unforeseen event happened to you during the policy year.
The rising trend of lifestyle diseases, critical illness, and sudden demise at a young age are some of the main reasons. Tip: The bigger question here is insurance adequacy, which needs to be determined carefully before opting for the same. Alternatively, you can choose to enhance your coverage later as well.
Explore the right investment opportunities: Many millennials are still hesitant to invest in newer options available as they are stuck between the old traditional investment mindset and the contemporary style. It is important to explore the right investment opportunities to build a diversified portfolio based on your goal and risk profile. Tip: For example, if you invest INR 10,000 in a mutual fund SIP, you can get nearly 12% to 15% CAGR instead of 7% p.a. on a fixed deposit. Also, the investment would have higher tax efficiency than a fixed deposit.
Millennials need to realise the need for a robust financial plan and strike the perfect balance between savings and expenditure for their future financial well-being.
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