Anshika Khanna (name changed) was a 20-year-old college student when she first understood the concepts of saving and investing. “My roommate would diligently draft a budget and list each and every expense regularly. She would read extensively about personal finance and was investing in various asset classes too.”
Eventually Khanna got interested and she started doing her own research on money management and before long, she had already developed the habit of investing regularly. However, Khanna feels that it was a matter of chance that she happened to be around someone who was financially savvy at a very young age which encouraged her to take baby steps towards gaining financial independence. “Had it not been for my roommate, I would not have cared about saving and investing money in a disciplined fashion as a college student. Even if somebody would have advised me, I would have rejected the idea because I used to have the notion that you only need to start thinking seriously about money management once you start earning,” Khanna says.
In India, where financial literacy remains abysmally low and basic financial education has no mention in school curricula, for most young people familiarity with concepts like saving and investing only starts when they start earning. The learning curve of managing finances is generally marked with a lot of hits and misses, with some experiences causing significant monetary losses. In the case of women, the road is more bumpy because gender stereotypes and patriarchal beliefs make it harder for women to learn the rope of personal finance.
For Khanna, the early start into the world of investing helped her avoid mistakes that she witnessed her peers commit. “By the time I started working, I had become well-versed in the gamut of investments and had developed a fair idea of investing as per your goals, risk-taking abilities and most importantly the ability to spot ‘investments fads’. However, some of my friends and colleagues had a harrowing time decoding that investing cannot be a one-size-fits-all approach and they lost quite a lot of money in the process.”
It was this realization of the gaping hole in the education system that led Khanna to also get her younger sister started on the basics of managing money. “An important takeaway from my experience is that many women, even if they have the chance to learn the tricks of the investment game, tend to slack because of lack of confidence and the perception that their father, brothers or their husbands or boyfriends will do a better job. But, many fail to realise that relegating the task of money management to someone else, no matter how trusted that person is, is synonymous to relinquishing control over your finances. As unpleasant as it may sound, all women should be prepared for situations when they may not have their fathers, brothers or husbands to turn to.”
Preeti Zende, founder of Apna Dhan Financial Services says, “There’s no time like your twenties to start putting your money to work for you so that you can achieve your financial goals well in advance. Developing good spending and saving habits and learning to budget and invest during your twenties, can help you prevent needless debt. This is that phase of life when you would have lots of aspirations as well as opportunities. People in this age group have something that a lot of people don’t have: time! Those who take advantage of it can set themselves up for early financial freedom.”
While the determination to start saving and investing early on can be a game changer in the long-run, it is also important to know where to draw the line. This is the age when liabilities and responsibilities are few and the desire to tick off items from the idiomatic bucket list reigns supreme. Consequently, many young investors end up making erroneous assessments of their abilities to manage investments. Zende says, “When you are naïve in investing, a very basic financial instrument such as mutual funds is preferable. Mutual Funds are suitable for all types of investors with varied risk-taking abilities and goal horizons. If you are getting pocket money or if you have started earning through your summer internships or projects you can start investing in mutual funds for short as well as mid-term goals.”
Zende further suggests, “For short-term goals such as buying a mobile or laptop, you can invest in a liquid fund along with a bank RD. If you want to save some money for your higher studies which you may take up in 5 years then you can think of going for a balanced fund along with an ultra-short-term debt fund. If you are about to start a job and are thinking of long-term investing, simply start with a large-cap or an Index fund and keep on investing irrespective of the market level.”
Urmila Singh of S9 Financial Planners says knowledge of financial planning can go a long way in ensuring that young women remain in control of their lives. “Concepts like inflation, power of compounding, contingency plans, investment avenues, short term and long term investment goals must most definitely be taught to all the young women of India. They need to know finance just how easily they know about doing reels on Instagram, knowing latest fashion trends, being tech savvy or even food blogging. The more you encourage these young women to learn about finances, the more you open doors for confidence, growth and most importantly independence for them,” she says.
1. The internet is a great place to start honing your financial literacy. There are a plethora of apps, websites that provide quality information free of cost.
2. Joining or starting a financial literacy group or club in your college can make the process enjoyable and help you stay motivated.
3. You can start using budgeting apps to get into the habit of saving and tracking your investments and eventually you can move to other personal finance apps through which you can invest in various asset classes.
This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund.
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