These days all youngsters want their part of success very soon and especially who are in their initial days towards financial freedom face several challenges. With just few steps in the financial world they land up with financial responsibilities. Since childhood we all rely on our parents for our financial matters, therefore, most of us don’t have much knowledge and experience to handle the finances on our own. Without any disturbance, let’s understand what the current generation is facing and how they can come over with their financial problems.
Once the youngsters enter the professional world and start working, they start taking financial responsibilities of themselves, siblings and if necessary their family too. They face lots of real-life challenges like living in a new city or country, paying rent and many more.Whether we blame the bad parenting or our poor education system, there is nothing more than a few basic things about personal finance which youngsters know. Incomplete knowledge about finance management, it is difficult to handle these responsibilities on its own. They are more likely to harm their financial structure with incomplete or no knowledge about money.
The solution for this problem is to start the financial education at an early age.Parents and the educational institutions have to take initiatives to educate children regarding money. Financial management is easy to learn for those who have graduated or completed their education. One can find lots of articles, news and discussions on topics like budgeting, savings and retirement planning,living within one’s means, managing credit and debt. Financial literacy will help the young generation to avoid chaos and make wise decision in future.
In India, the cost of higher education is too high as compared to the income of a common man. This is where the education loan comes in light. The loan helps youngsters to complete their studies without any trouble. But once, students becomes graduate and start earning, repaying the loan becomes difficult for them. There are two major reasons for the non repayment of loan amount. Firstly, lack of discipline and secondly, the salaries are quite low in their starting career. This results in the on growing debts. Irregular repayments not only become a burden for them but also weaken their credit scores.
As we understand that repaying loan in the beginning years of your career is a difficult proposition. To make things easier, do not borrow any more loans. Try to get the longest tenure on your education loan to keep monthly installments at a manageable size. Once the income increases the borrower can easily lower the loan tenure. Though, it is needless to say but cut down your expenses.
Financial emergencies never come with a warning. It can be in any form and at any time. Starting salaries are generally low which leads to limited savings. Even a single emergency can eat all your savings instantly. For example,if due to any reason you’re hospitalized, the company will not give your monthly salary. Surviving in such a difficult time until you resume your job will requireadequate amount of money for which youngsters should always be prepared.
One can easily fight financial, health, and other life’s uncertainties with an emergency fund. This fund helps the borrower to survive even when the pay checks are not regular. To plan for an emergency fund, young generation need to wisely divide their income. To start savings for an emergency fund, youngsters can aim to save atleast 3 to 6 months of their income in a savings account for emergencies. Insurance need should also be estimated as the insurance premiums will be the lowest.
Need Vs Want
What youngsters want and what they need creates confusion in their mind. Needs are what we require essentially in our life such as clothing, food, shelter and so on and want is defined by the purchasing power and therefore, is unlimited such as entertainment, exotic vacations and so on. If we observe the young generation, the prime reason why youngsters are unable to save is because they spend higher amount of their income on their wants rather than on their needs.
It is okay to spend money on wants but these expenses has to be considered carefully as it can cause dents on your financial health. We do not expect to be harsh on yourself and not enjoy life but we just want you to seek your wants with a little control on your finances. To be specific, identify and fulfill the basic needs and avoid any unwanted spending on your wants and track your expenses. As your income increases, one can be more lenient about their wants.
Finding the Right Balance
It is important to find the right balance between saving and investing. Before analyzing the right balance, let’s first understand what these two terms mean. Saving is a sum of amount what is remained after meeting all your expenses. Whereas, when these savings are put in financial instruments where the money increases, it is called investing. It might be quite difficult for youngsters to save a generous amount of money due to obvious reasons. This further implies that investing is a big challenge for them. Even at times, youngsters don’t even consider investment as an option.
There is no good time to start planning for your finances. Make a thumb rule to save at least 10% to 20% from your salary for the future. Out of that saving, try to invest a portion in an investment plan that fits in your budget. If you want to invest in stock market or MF’s (Mutual Funds), think long term tenure and the earlier you invest the better results you will get through it.