5 Money Management Tips for Youth

Armed with capabilities & sound knowledge you have successfully made your journey from college to professional life. And now that you proudly fill your pockets with your hard earned money, you have many more needs to spend it on. Address these needs by growing the very money, not with extra work but with investments. As a naive & young professional, money matters might confuse you but with few basic & effective application methods you might just emerge as an informed investor:

1.  Put your idle money to use: Savings is not a priority when you are young & even if not a spendthrift, most of the youth push savings plan for future. But with small & smart efforts of planning even the money lying in your savings account can be put to use:

• Sweep-in Facility by Banks: This facility combine the high returns of a fixed deposit with the liquidity of a savings bank account. It means if the balance in your account rises above a threshold limit, the excess funds are automatically transferred to fixed deposits and you earn a better interest on your money. The interest offered varies in various banks
• Liquid Funds: Invest in liquid funds that offer returns on your idle money without much credit risk & with the benefit of high liquidity. They Invest in securities with a maximum maturity of 91 days & money reaches your bank account within 24 hours of redemption
• Short Term Debt Funds: If there is enough in the flexi account and in liquid funds, consider putting the rest of your cash holding in short-term debt funds generating stable returns. The short holding period of these funds make them less vulnerable to interest rate changes

2.  Learn Tax Saving: Tax saving plan indirectly encourages savings. It only makes sense that you put your hard earned money to optimum use & learn about basic tax saving investment instruments like:

• Public Provident Fund: Popularly known as PPF, these investments earn an assured return of 8.8% per annum. Not only is the interest tax-free, investments of upto Rs 100,000 in each financial year are eligible for tax benefits under Section 80C of the Income Tax Act.
• Equity-linked savings scheme: Investment in Equity-linked savings schemes of Mutual Fund is also eligible for deduction under Section 80C. The lock-in period for ELSS investments is 3 years & hence there is no capital gains during redemption of the investment

3.  Get a Term Plan: The very thought of getting yourself insured at young age might startle you but getting it now works in your favor. A term plan is the cheapest form of availing an insurance cover because when you are young the premium amounts will be much lower than later & also it remains unchanged over the tenure of the policy. Certainly with time & change of needs & obligations adding other policies to your portfolio maybe needed but as of now get started with term plan.

4.  Use the Plastic Money Rationally: The attractive benefits offered by credit cards are advised no to be used for purchasing everyday item because these benefits come with a cost. They might put you in unnecessary debt as the interest rates on their services are anywhere between 2.5 per cent to 3.4 per cent per month. Hence, it is viable that you restrict your dependencies on credit cards & spend judiciously.

5.  Update your Financial Knowledge:  Apart from several books, websites and publications that offer information on investing and personal finance, hire the services of a competent and experienced financial planner or advisor. It pays well to get an insight from the expert while evaluating or choosing the best options from you. This strengthens your financial knowledge base & enables you to strive towards your goals confidently. 

As you switch over from your jeans to formals, these basic wealth management tips would ensure that this transition of yours is as enjoyable as you had always planned.