India is witnessing a steady increase in the spending power of its citizens, especially among the younger generation, commonly referred to as ‘Millennials’. With easy access to credit cards and numerous online shopping platforms, millennials tend to prioritize spending over saving. Like generations before them, millennials need guidance on managing their money better. This group, consisting of 18 to 35-year-olds, makes up about 46% of India’s workforce.
Most millennials dream of owning a big house, traveling abroad, maintaining a decent work-life balance in demanding corporate jobs, and achieving financial independence. Social media increasingly influences their financial aspirations. The question often arises: do millennials live realistically? Are they saving enough to sustain their future lifestyle?
If you are a millennial looking for practical ways to save money for your future, read these top 10 tips from our experts.
1. Develop Small Saving Habits
Millennials differ from previous generations regarding saving habits. Traveling, owning fancy gadgets, and following fashion trends often hinder saving for long-term plans. Saving a portion of the monthly income before spending can be a good start toward building saving discipline.
Smart tip – Follow the 50-20-30 rule
Set aside 50% of your income for living expenses, 20% for food, entertainment, and travel, and keep the remaining 30% as savings.
2. Track Expenses
Millennials often view their income as disposable and prefer spending it on immediate needs like rent, groceries, and dining out. Before they know it, they might find themselves living paycheck to paycheck. A smart step towards better saving habits is to understand spending patterns by noting all expenses over a period. Once a pattern is identified, focus on tracking and cutting unnecessary expenses.
Smart tip – Use expense tracker apps
Tech-savvy millennials can use mobile expense tracker apps to categorize expenses into buckets like food, shopping, and entertainment. These apps can set reminders for bill payments to avoid late fees and easily split and settle bills. They also help track real-time spending and avoid impulse buys, giving better control over finances.
3. Reduce Discretionary Spending
Millennials just starting their careers or recently becoming financially independent should avoid non-essential expenses to begin saving. It’s important to distinguish between essential and non-essential spending. Uncontrolled discretionary spending can quickly deplete income, leaving no funds for future use.
4. Avoid Unnecessary Debt
With easily accessible credit facilities, many young adults use them to meet lifestyle demands, leading to potential debt traps and poor credit scores. To save money for the future, avoid unnecessary debt like unsecured personal loans or credit card loans. Instead, plan your debt needs by considering the purpose of the debt, repayment planning, and available funds for repayment.
5. Set Up an Emergency Fund
Goals like buying a new car, saving for a wedding, or home renovation require sufficient funds and can motivate better saving habits. However, an emergency fund is often overlooked. Saving for contingencies like medical needs is essential. Even if unused, an emergency fund motivates you to set aside money that could be helpful in the future.
6. Get Familiar with Mutual Funds
Many millennials who haven’t started investing lack the knowledge to begin. Saving money for long-term goals is possible through investments in Systematic Investment Plans (SIPs). Regardless of income level, aim to save at least 15-20% for mutual fund investments, as these can yield positive returns depending on the chosen fund and investment pattern.
Smart tip – Choose a mutual fund based on risk appetite
There are various mutual funds available. Start investing by looking at their risk rating. Typically, higher risk in a mutual fund means better chances of positive returns.
7. Learn the Basics of the Stock Market
Many millennials have a basic understanding of the stock market as it becomes part of various curriculums. Basic stock market knowledge is easily accessible to everyone. Exploring stock market investment options can help allocate a portion of your income towards investments. Understanding stock market fluctuations can help protect your investment against volatilities.
8. Get Insurance
Purchasing insurance is crucial today as it provides financial cover in emergencies. Millennials should consider having financial security through insurance like health and life coverage. Insurance offers financial protection for your future and your family’s future. Learn the basics of insurance to choose the right one for your needs. Remember, insurance is not only for older people but also beneficial for younger individuals.
9. Make Some Lifestyle Changes
Millennials’ lifestyles are different from previous generations. They seek several small luxuries in life. However, making certain lifestyle adjustments can help amass significant savings in the long run.
10. Avoid Paying Only Minimum Credit Card Dues
Credit cards allow users to pay the minimum due amount, but this can lead to postponing total dues and using the funds for other expenses. To save money, make full payments on credit card dues. This positively impacts your credit report and gives better control over your income and expenses.
Conclusion
India’s changing demographics show that younger Indians save less than their parents. While current needs may encourage overspending, it’s equally important to consider future needs like a home, car, and saving sufficient funds.
FAQs
How much should I save every month in India?
To save for future needs and cover emergencies, it is advisable to save approximately 30% of your monthly income.
Is it important to save money?
Saving money today can result in future income growth, achieving goals, and financial stability. It also acts as a backup for emergencies.
Why is investing in mutual funds good?
Mutual fund investments offer growth opportunities for those looking to see their money grow over a specific investment period.
How do I invest in mutual funds?
Investing in mutual funds is easy with the Fisdom app. Download it on your smartphone to explore various mutual fund categories and invest in top-rated funds.
What should I do with my savings?
Invest your savings in different avenues with various risk categories. This helps create an investment portfolio and grow your savings over time.
