The ultimate guide to saving tips for young adults & soon to be parents.
Teaching your child, the basics of money management and finance is not a usual activity despite its importance. While money as a concept is introduced to us early on in our lives; how to save and manage this money is introduced much later (or never). Let’s rectify this by exploring some saving tips for young adults or young parents to help them save and manage better.
1. Control your expenses
An impulse shopping spree or ordering food from outside every other day or partying with your friends; all these events can significantly impact your monthly budget.
This is where controlling and budgeting helps; by assigning yourself a budget for spending, saving, and investing you can discipline yourself and curtail your spending drastically.
2. Budget for the future
Create a plan, and make a budget that focuses on your monthly needs like rent, groceries, transport costs, utilities, loans, and EMIs.
Your spending should ideally be less than your monthly budget so that you can set aside some money. Then move on to your luxuries like shopping or eating out and finally, tally all the costs and figure out how much you have saved up and if you can reduce your spending in any of the above categories.
Once you have completed this task, you will know the amount you are comfortable sparing for investing and saving!
3. Save for an emergency
The sudden pandemic and the following health crisis show how unpredictable life can be. It’s important to think about the future and plan for it financially – saving money for unforeseen financial crises is the first step.
Create an emergency fund so that this fund can help you stay afloat for a while. Ideally, 10%-20% of your earnings for an emergency fund and this acts as a cushion against job loss, medical crisis, or a sudden family emergency. This fund should be ready- available and highly liquid.
4. Save for long-term goals
Whether it’s your child’s education or your executive MBA plan, saving for long-term goals is the best saving tip you will ever receive.
From saving up for your first house or car, it’s important to find out the future cost, create a timeline for your goals and find out how much you need to invest monthly or yearly to reach that target. You can create multiple long-term goals and allocate money each via SIPs.
5. Consider investment seriously
Investments are a great method to grow your savings; the earlier you start, the more returns for you. Considering this route is extremely important, many young adults or new parents shy away from this tool because of a lack of awareness and knowledge.
If you are unaware of the available investment options then educate yourself or get a financial advisor to help you. You can start investing monthly Rs. 100 in Mutual Funds or explore relatively safer options like Digital Gold or lock for money in tools like PPF.
The opportunity to invest and the wealth of knowledge around this subject is endless. You take up online courses or download apps that can help you invest and save for different goals based on your risk appetite and yearly income.
By investing systemically and for a long period of time, not only do you get the benefit of compounding interest but also the opportunity to reach your financial goals with ease.
6. Learn to tackle debt
Debt is of two kinds – one that is born from necessity and the other is for luxury. Taking on an education loan to finance your degree belongs in the former category while taking a personal loan to travel to Europe belongs in the second category.
By understanding this small distinction, you can easily tackle debt as well as budget your finances. With credit cards and EMI options, indulging yourself with material happiness like buying a phone or a laptop may be enticing but can create a serious financial burden in the future.
It’s important to know the difference between need and luxury before taking on a loan or signing up for an EMI.
By taking control of your finances today as young adults you can save your future and save for your future! Inculcate the habit of budgeting, saving, and investing so that you can finance not only your MBA degree but also your child’s!