Lack of financial literacy among Indians has led to many facing financial challenges today. It’s crucial to impart the importance of early savings to the next generation for a secure future. Teaching them financial skills in their early 20s can pave the way for a more stable and prosperous life ahead. According to a report published by the Asian Development Bank in March 2022, only 27% of Indian adults and 24% of women meet the minimum level of financial literacy as defined by the Reserve Bank of India.
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In our 20s, we hold ambitious dreams for the future. Studies indicate that 77% of today’s youth in this age group aim to become homeowners, while 59% dream of owning cars, and 55% long to travel abroad.
Financial planning is the essential skill needed to turn these dreams into reality. It enables us to buy a home, purchase a car, or plan a vacation without financial strain. The reality is that 69% of Indian households lack financial security, highlighting the pressing need for better financial literacy and planning education. By acquiring these skills early on, we can pave the way for a secure and prosperous future.
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In the 20s, individuals often have fewer financial responsibilities compared to later stages in life. Fewer dependents and commitments can free up more disposable income, making it easier to save and invest for the future, potentially leading to greater wealth accumulation in the long run. However, most people revel in the joy of spending their newfound earnings and a very small fraction of individuals consider the importance of saving in the early stage of their careers.
Rationalise your Spending: In today’s digital age, fear of missing out (FOMO) and the “you only live once” (YOLO) mindset can lead to impulsive buying behaviour, especially among the youth. With smartphones and easy access to shopping websites, impulsive purchases have surged in recent years, and online shopping is projected to reach 300 to 350 million shoppers by FY2025, growing at a rate of 30 percent.
Impulse purchases bring great satisfaction but making this a habit leads to financial strain in the long term, accumulating unnecessary debt or spending beyond one’s means. This can jeopardise financial stability, hindering the achievement of important goals like financial independence, career development etc.
Create a Budget: Watch out for those spontaneous spending sprees and invest your time in creating a budget. Budgeting is a critical element in financial planning. A well-thought-out plan can help you manage your money wisely by keeping track of your income, expenses, and savings.
Your budget acts as a roadmap, guiding your spending choices and ensuring you stay on track to achieve your financial goals. So, take control of your finances early on with budgeting to build a financially stable future. Creating a budget is not about restricting yourself but making conscious choices that reflect your priorities.
Create a Strong Credit Score: A strong credit score opens the door to a variety of financial products and benefits. You become eligible for credit cards with higher limits, and this enhances the likelihood of quick loan approvals with lower interest rates.
A higher credit card limit gives you greater purchasing power and enhances your financial flexibility, allowing you to manage your expenses more effectively.
To maintain a strong credit score, it’s crucial to prioritise timely payments, avoid excessive debt, and regularly review your credit report for accuracy. These responsible financial practices will set you on the path to a secure and successful financial future.
Maximising Credit Card Rewards: Credit cards have become an essential part of managing daily expenses in our digital age. When used responsibly, they offer valuable opportunities to maximise benefits from spending. Credit card rewards allow you to earn points, miles, or cash back on various purchases, making them an appealing choice for smart consumers. Embracing these benefits can lead to a more rewarding financial experience when handled with care and consideration.
Balance work, savings, and fun for a rewarding financial future. Take time to unwind yet prioritise savings for a secure future. Foster strong fiscal habits, venture into investments, and set precise goals in your early 20s to build a strong foundation for financial success.
-The author is Vice President and Head of Products & Solutions – India and South Asia, Visa. Views expressed are personal.
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