While there is no basic thumb rule to saving, it goes without saying that everyone should save. This is as much true for someone in their 20s as it is for someone in their 30s and 40s. For the millennials, people in their early 20s who have just started their working life, savings might not make a lot of sense. It is definitely not the “cool” thing to do. When there are new gadgets to be bought, fancy places to hang out at and exciting things to experience, why would one bother to save money at an early age?
This quandary is relatable, but saving is important because it helps you be prepared for unforeseen crises and emergencies. This doesn’t mean you don’t buy the things you fancy or splurge on evenings out with friends. You should do all of what makes you happy, but at the same time, saving is an important habit that one should inculcate. It is a habit that has enormous benefits over the long-term and comes more than handy when there are more responsibilities on a person’s shoulders.
It is for this reason that you should start saving from your first job itself. The sooner you get into the habit of saving, the better off you will be later in life. To elaborate further, here are 5 saving tips for people who are in their first job:
- Don’t buy everything you see. You will suddenly have more disposable income than ever before and it will be hard to resist the temptation of spending on clothes, gadgets, outings etc. But you should be a cautious spender
- Keep an emergency fund aside that you can access quickly in case of some personal or family emergency. And refrain from dipping into this fund for normal expenses
- Don’t just save, invest that money. Put it in equity mutual funds or balanced funds to allow your savings to grow over time. Investing your savings also takes it away from your bank account, which makes it tougher to spend it
- Buy life insurance and health insurance at an early age. You will get it for cheap and that will translate into heavy savings in the years to come
- Plan and save for goals. Think about the goals you want to fulfill–marriage, further education, trip abroad, own home–and save for each one specifically
All of this may seem overwhelming to someone who has just started working. But it is not hard to achieve. All you need to do is save a small part of what you earn. To begin with, you can save 10% of your income. This should be a bare minimum. Then, as you get experienced and start to earn more, increase this percentage. Your saving portion should go up with your income.
This is how someone who has started working can begin saving as well. Of course, the permutations and combinations would change from person to person. But on a broad basis, what is important is to start saving, no matter how small the beginning is.
This article is an elaboration of our inputs published by Business Insider on 22 September 2016.