Are You a Young Indian Wanting Freedom from Financial Constraints This I-Day? Here’s What You Can Do

“Two years ago, when I started investing, I was not entirely aware of how life-changing and liberating it could be. In 2022, I realized the importance of creating a sufficient financial cushion. And this Independence day, I want to actively work towards creating a comfortable money corpus that will fund all my dreams and ambitions.”

The importance of having enough savings and regular investing dawned on 24-year-old Delhi-based communications professional Yumna Ahmad when she began applying for graduate programs abroad.

For her, independence was redefined as being able to achieve life goals without being hindered by financial constraints.

“Money, after all, is the freedom to pursue what you want, when you want,” she said.

Equities are the way to go

Just like her, 59% of young Indians aged between 18 and 35 also perceive this to be true freedom. Insights from the Outlook-Toluna Independence day survey, which studied 1,800 respondents, also positively revealed women to be better savers than men. While 33% of women save half of their income, only 18% of men took the same course.

However, conventional knowledge considers a corpus that is 30-40 times one’s annual expense as sufficient. But to amass an amount this substantial, it’s important to start early, with high-risk, high-return investments. Youngsters are unlikely to have liabilities to pay off at this stage, so investing in equities is preferred.

Consider this. Over the past 40 years, the BSE Sensex, on average, delivered a 15% CAGR. On the other hand, popular vehicles like FDs have just generated returns between 5-8%. Saumya Shah, co-founder of tarrakki, a wealth management platform, said, “One should invest in the markets for a longer investment horizon with enough risk appetite. Sit tight during market turmoils and uncertainties, and let equities do the magic of compounding on your savings”.

Having insurance is a must

Working as a junior digital associate at the European Climate Foundation, Tanishka has found a professional sweet spot that combines good income with solid work scope. Her next aim is to get good health insurance. And she’s on the right track.

Nema Chaya Buch, a Pune-based financial planner, underlines the significance of getting insurance early on. “Insurance planning is a critical component of financial planning, as it is an efficient way of protecting household expenses and critical goals when there is an unplanned or unexpected sudden life event that can derail or imbalance the financial situation. Simply saving is not enough”.

Easy money is never easy

There is nothing wrong with being aspirational. But not at the cost of overspending. While facilities such as BNPL (Buy Now, Pay Later) allow young people to spend way more than they earn, it is extremely damaging to one’s financial health in the long run. Before you know it, you might end up buried in high-interest short-term loans that spiral dangerously into a mountain of debt.

As Vimal Sharma, Founder-Director and CEO, SMOOR puts it, “For many young professionals and fresh graduates, expenses, savings, financial plans, and insurance is all big talk. They mostly believe that money is there to spend. But this cannot be far from the truth. Spending money is an art. One has to keep a perfect balance between expenditure and generated income because the alternative can be supremely uncomfortable, to say the least.”

“It is advisable to spend money wisely and only on the things you need, not want. What you are earning today should be invested in preparing for tomorrow. Always keep track of your expenses and losses before anticipating profits and incomes,” he signs off.

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