Building a Strong Financial Foundation: Essential Money Skills for Young Indians
By Bhushan Padkil, Sr. Director and Head of Consumer Interactive (Direct-To-Consumer) India, TransUnion CIBIL
Bhubaneswar: India’s youngsters are the torchbearers of the country’s future development and financial success. As such, it is important for them to build a strong financial foundation in their early years. This will help them to manage their money better and acquire essential money skills that can be beneficial in helping them achieve financial stability as an adult.
From understanding credit scores to learning about investments and budgeting, there is no lack of information available on how to handle finances effectively. However, young Indians must be aware of what basic skills they need to have mastered before they can take advantage of more complex methods like investing or taking out loans.
In this blog, we’ll discuss some essential money skills that every young Indian should master in order to build a strong financial foundation.
Budgeting and Saving Money
Budgeting is about setting a limit on your spending for the month based on your income and expenses, whereas saving is about putting away some of your income for future use. Creating a budget can help you better manage your finances as it allows you to track where you’re spending money and identify areas where you can cut back or save more.
On the other hand, saving money helps ensure that if something unexpected happens in the future, you’ll have enough funds to support yourself without having to rely on credit cards or take out loans.
Some tips for creating a budget and sticking to it include: tracking your expenses; setting realistic goals that you can stick to; prioritizing needs over wants; setting up an emergency fund; avoiding impulse purchases; and taking advantage of discounts or coupons.
The budget should also include saving for short-term financial goals and long-term goals like retirement. This will help young Indians ensure they have enough funds to meet their future needs without relying on credit cards or loans.
Managing Credit and Debt
Credit and debt management is one of the most important skills any young adult should have. Credit cards, loans, and other forms of credit can be very useful tools when used responsibly. However, they can quickly lead to unmanageable debt if not managed properly.
Young adults must understand how to use their credit cards or take out loans wisely to avoid falling into a debt trap. This includes understanding what interest rates are; how long different terms last; when payments need to be made, whether there are any penalties for late payments; and the importance of paying off debts on time.
It’s also important for young adults to understand the concept of credit scores, which financial institutions use to evaluate the creditworthiness of an individual. Having a good CIBIL Score is essential for taking loans and getting approved for credit cards, as it helps lenders make informed decisions about whether or not to lend money.
Investing for the Future
Investing is an important skill for young adults to have as it helps them build wealth in the long term. Investing early can help them take advantage of the power of compounding, which means that their money will grow faster over time as investments earn returns and reinvest those returns. Before investing, young Indians should learn about different types of investment options such as stocks, bonds, mutual funds, and ETFs.
It’s also important to understand risk tolerance and how to choose investments based on individual goals. Finally, it’s important for young investors to be consistent with their investments over time and not get discouraged by short-term market volatility. This will ensure that they are able to reap the rewards of their investments over the long run.
Planning for Retirement
Retirement planning is something young adults should start thinking about early on. Compounding interest can help you save significant money for retirement if you start saving early and make regular investments.
It’s important to find the right balance between short-term goals, such as buying a car, and long-term goals, like retirement, while keeping your age and risk tolerance in mind. Retirement planning also requires understanding different types of investment options, tax implications, and setting realistic goals that are achievable over time.
Building a strong financial foundation is an important skill for young Indians to master. It requires understanding how to manage money, debt, and credit, investing for the future, and planning for retirement. By taking the time to learn about different financial concepts, they can ensure that they are able to make smart decisions with their money and build wealth over the long term.