Need to invest
For any individual beginning his journey after education, he has to fulfill his/her responsibilities. Everyone should understand how money works. An Indian individual undergoes 3 important events in their life when capital expense is highest. Separating needs from wants builds discipline very early, investing is easier when you form a habit around it. It’s easier to form one when your responsibilities are fewer.
First goal should be your own retirement
Second build that corpus your kid needs for his education
Third is your kid’s wedding
How much do you need ?
Planning for retirement
After you retire, the money in your bank account is the only source of income to take care of you for your day to day expenses as well as your health expenses. In a country like India where social security is minimal, it becomes imperative to save up for retirement. Our plan for retirement cannot be depending on our children as they themselves have a ton of responsibilities to shoulder.
Advances in the field of medical sciences has increased average lifespans, this has led to a deepening retirement crisis as people are living longer but not saving enough. To put it in plain words, the longer you live, the more money you need to take care of yourself.
The earlier to start investing, the lesser you need to put aside every month. For a 2.5-3 crore retirement corpus at 60 years of age, a 20 year old needs only Rs.2104/- invested at 12 %, a 30 year old needs Rs.7082/- , a 40 year old needs Rs.25021/- , a 50 year old needs Rs.107601/- . To make understanding easier, you need to put aside 4 times more every 10 years. Hence the earlier you start the lesser you need to invest.
Planning for Kid’s education
An investment in knowledge pays the best interest – Benjamin Franklin
Planning for education is very similar to planning for your retirement. The difference here is you might need this amount before you retire.
Education inflation is one of the highest inflation in India. It’s not easy to fund your child’s education if you haven’t saved enough. There will be pressure on your yearly budget, you will constantly worry about your child’s education, there maybe chances you wont be able to provide quality or desired education to your kid. Starting early again becomes the key to not worry in the future. Not worrying about it makes you take better decisions with respect to your professional life as well.
Planning for kid’s wedding
This expense depends from culture to culture, some communities spend higher and some lower. This expense is likely to happen after you retire. The rate of wedding inflation is almost two times to that of general inflation. And the cost keeps rising year on year.
The key to save up enough for your kid’s wedding and not burden him with loans in the future ,is to start investing early. When a loan is taken to create an expense , rather than build an asset, it is liking borrowing time from your future. When an opportunity in your professional life presents itself, it becomes difficult to take it, as you constantly worry about your present debt.
Engineers do have the added skill to look at everything objectively, but when it comes to planning for finances they seldom do. One of the best ways to start investing is to create a habit, SIPs are a good way to achieve that. Starting now gives you a better edge over others to take asymmetric decisions when it comes to your work life.
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