Turning 18? Make your 'pocket money' grow with you

The sooner you start investing, the more your money will compound over the years. For instance, let’s say you started early and invested Rs 50,000, and your investment grew 12 percent per annum. If you stay invested for 20 years, you will end up with Rs 4.82 lakh.

But if you start later and have only 10 years to invest before needing the money, then you will end up accumulating only Rs 1.55 lakh. That’s the power of compounding.

The more you delay your investment journey, the lesser you end up accumulating

“It takes a good number of years to get double-digit returns in equity,” says Rushabh Desai, Founder, Rupee With Rushabh Investment Services.

And not just invest early. Financial advisors also suggest that you increase your investment every year. If you invest Rs 500 per month when you are 18, and increase it by just 10 percent every year for 30 years, you will accumulate a meaningful sum of money that’ll help you achieve your financial goals, explains Desai.

Make regular investing a habit

It is important to make investing a habit. How do you develop that discipline?

Kamath explains that your goals will change over time. You want to travel, buy a car or bike, a high-end smartphone, and so on. To do all this, you need money. Systematically investing your money at regular intervals will bring you close to achieving your financial goals.

Increase- or top-up, your SIP investments once a year.

There’s a simple way to do this. Desai recommends investing in two flexi-cap or large-cap mutual funds (MF) through systematic investment plans (SIP), and getting accustomed to the market. Start by putting aside at least 25 percent of your pocket money in these two funds. If you start earning at that age, keep aside a portion of your salary or stipend and invest in these funds.

Financial literacy

When you turn 18, you are a major, an adult. In other words, you can legally decide how to invest your money without requiring anybody’s consent.

This is also the age when you have a chance of landing a side-hustle or a part-time job. This brings in some money, which hopefully goes into your savings bank account. This will trigger offers from banks, for loans and credit cards. Loans can be particularly dangerous as they offer you easy money and come with high penal interest rates. They can spell financial doom if you fail to repay on time or, say, roll-over your credit card debt.

A good way to acquire basic financial literacy is to read up on personal finance. There are several books that tell you in a simple language how to manage your money. Moneycontrol recommends the following:

1. Let’s Talk Money, by Monika Halan


2. If God was your Financial Planner, by Suresh Sadagopan


3. Yours Financially, by Kalpesh Ashar


4. Happily Insured, by Kapil Mehta


5. The Wisest Owl, by Anupam Gupta

Don’t be afraid to make mistakes

It is important to try your hand at investing. “Try with smaller amounts of money and learn from your experience,” says Kothari.

Open a demat account along with your savings bank account. Many youngsters have been lured by cryptocurrencies in the past three-odd years. But recent massive crashes in crypto prices have brought out the risk inherent in them. Invest in cryptocurrencies if you must, but invest only as much as you can afford to lose. For instance, for every Re 1 you put in crypto, make sure you put at least Rs 20 in a MF scheme. If you can’t, then avoid cryptocurrencies.

Be patient, don’t borrow

Kamath tells us that although he started investing at 17 and made “decent money,’’ he blew it all by the time he turned 21. In the meantime, Kamath had also borrowed money, which he had invested in stock markets. That, he says, made him learn life’s toughest lesson.

“It took me a few years to pay back the money I had borrowed to invest in the stock market. Ever since, I have never ever borrowed. I have followed the same principle in my business. Zerodha could have grown exponentially on borrowed money, but we didn’t do that,” he says.

Kamath also advises that we stick to investing in instruments that we understand.

The other thumb rule for growing your money is to be patient. Invest and forget, in other words. Don’t check your demat account balance and market prices daily. Give it time.