As India’s youth starts to earn, it gives rise to higher salaries, needs and aspirations. Managing money is an essential and vital part in their lives to help them live their life in a balanced way. Some money management tips for young investors are given below:
Do not keep your money idle
By leaving money idle in a savings bank account which offer less interest rates can be painful knowing that a lot of options exist by which you could have doubled that sum. Some banks do provide higher interest rates than the norm, but that should not justify keeping substantial money in the bank. All you need to do is to set aside enough money for your monthly expenses, say of about 6-months and that balance amount should be used for investment.
Investment can be made through multiple vehicles and can be judged based on the risk-reward ratio. If you are looking for higher risk and high reward, the equity mutual funds via a systematic investment plan is for you. If you consider medium level risk, then liquid funds can be considered. Finally, if you don’t feel like taking any risk, then bank fixed deposits can be apt. You could also work out something which is a combination of all of the above types of investment. The key is to make money work for you.
Buy an insurance plan
With age on your side, buying insurance is unlikely to be a priority for you. Nonetheless, the importance of buying insurance cannot be overstated. Start off with a term plan, term plan insurance purely offers insurance only. For instance, if an incident occurs, then the policy holder’s dependents receive the sum assured; however, if the policy holder survives the term, then no pay out is made.
Since the investment component is not availed, a term plan is the best form of availing insurance cover. Given that you are also young, the premium amount will be lower now. Overtime, as your needs and obligations change, you can consider adding more policies to your portfolio. But now is the right time to get started with a term plan.
Open a PPF account
PPF or Public Provident Fund is an attractive long term investment avenue. Currently, PPF assures return of 8.8% per annum. Not only is the interest tax-free, investments of upto Rs 100,000 in each financial year are eligible for tax benefits under Section 80C. Additionally, the investments are backed by a sovereign guarantee ensuring the highest degree of safety for both the sum invested and interest.
PPF makes and ideal avenue for long-term investing. Recurring investments add an element of discipline to the investment process. PPF can provide for long-term goals like buying real-estate, retirement etc.
Use your credit card consciously and judiciously
Credit cards can become very hard to manage if not handled properly in terms of paying your credit debts on time. You need to be disciplined and spend only as much as you can afford to pay for at once. Credit card usage can be very attractive but the disadvantage about their interest rates can become very painful.
Educate yourself on financial literacy
In India, the investment industry is coming of age. There is a growing breed of investment advisors and financial planners. Not to forget the many investment companies who have sprung up recently. That being said, it gets difficult for you to choose the right investment products suitable to you. It is necessary for you to be educated about financial investments and with the right advice from financial planners you can secure your financial life.