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5 great money tips for millennials: Let’s get a hold on our finances!

Here’s how we can take control of our finances in times like these and make them work for us

October 15, 2020 / 09:29 PM IST

We often hear that millennials aren’t prudent investors or focused on savings, but the COVID-19 outbreak has left many of them worried about their financial situations, both in the short or long term. According to the Deloitte 2020 Millennial Survey, 80 percent millennials said that they were stressed about their finances, as their priorities are different from those of the previous generations.

Our generation is focussed on living our dreams with little or no future planning. The percentage of our income that’s saved every month has become lower and led us to face some financial challenges, especially now during this pandemic. Here are a few tips here will help make wise investment choices and ensure a well-cushioned future without compromising much. Let’s dive into some of the key concerns and get a clearer idea of where, when and how us millennials can safely invest for their future.

Should you create an emergency fund during a crisis like this? And where should you ideally store it?

Having an emergency fund is crucial as it offers a cushion to fall back on during tough times. There are a few ways to store an emergency fund such that it's easily accessible in case of an emergency. The first is hard cash. It's ideal to store at least 10 days of expenses in this form in case banks or ATMs are unable to dispense money. The other part of your emergency corpus could be placed in fixed deposits. With several NBFCs and even platforms like Freecharge, you don't require a bank account for fixed deposits. Additionally, you can also store it in a liquid fund. Liquid funds are low risk, short-term investment options that give you the benefit of instant withdrawals, and they have a higher interest rate than many savings accounts. When opting for this, it's always advisable to invest in larger funds since they are less prone to potential issues.

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Which asset classes should you consider investing in?

Gold is a great low-risk investment option as it has remained a stable and safe investment choice for generations. The purchase of digital gold has gained popularity over the past few years, as many of us prefer investing through apps, which make it easier to understand the investment instrument and purchase processes. Investing in e-gold is not only convenient but also provides much-needed security and safety. For those that are just starting to invest and fall in the lowest tax bracket, fixed deposits serve as a useful investment avenue that fetches a relatively decent post-tax return.

One can also consider investing in mutual funds a targeted investment option offering tax-free returns. They not only help you fulfil specific goals, but also generate wealth and beat inflation. You can also opt for equity shares, as the economic slowdown has led to high-priced shares falling to a lower late. With the right investment and, of course, taking a measurable potential risk, you could secure excellent returns.

Is it advisable for newcomers to invest in mutual funds now? 

Mutual funds can undeniably be a great way to meet one’s financial goals, and since they are goal-based, there is no right time to invest in them. Both earning and non-earning individuals can do so whenever they’d like. However, it's best to catch them at a lower Net Asset Value (NAV) than a higher one to maximise your profits.

As a newcomer to mutual funds, it's important to understand your risk tolerance levels, along with your investment goals, before deciding whether this investment option is for you.  Often, new investors gravitate towards SIPs or liquid funds as they offer greater flexibility with a much lower risk factor. Needless to say, you need to consider various factors to ensure that you're comfortable with your investments.

Is it wise to continue investing in monthly systematic investment plans (SIP)?

The COVID-19 pandemic has made life a lot harder for those who have either had a salary cut or lost their jobs entirely. So, the decision to continue investing in one's monthly SIP depends primarily on whether it will leave them with enough liquidity for any immediate commitments. For those of us who would find it difficult to continue, the SIP amount could be reduced to cater to their current capabilities. They could even go for a three-month pause for some breathing room. For those who haven’t had to face any financial challenges, however, continuing to invest in SIPs will only be beneficial.

Times like the ongoing pandemic remind us to focus on better financial planning to garner savings for the long haul, and we can safely make these investments via reliable channels such as Freecharge. Whether you’re a novice or have made a few investments before, Freecharge really simplifies the art of mutual fund investing. As per your goal requirements and risk appetite, you can choose from SIPs, debt funds, hybrid funds and ELSS options. You can start investing in mutual funds with as low an investment as Rs 100 and watch your money grow.

So don’t waste any more time, set the wheels of your smart investments in motion now.

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Tags: #Features
first published: Sep 30, 2020 11:25 am
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