Millennials today desire something more out of their lives which should be bursting with experiences. They do not get enthralled by the prospect of deferring gratification and consistently saving for some distant goal 40 years in the future. They want financial independence without having to follow the traditional path.
Although this might be true, there are some frictions which may also Millennials face. To stay afloat during an unprecedented financial crisis, good financial health holds the utmost importance. The recent disruption in the ecosystem caused due to pandemic is one of the best examples for Millennial to understand the importance & relevance of financial planning. One must begin financial planning and develop money-saving habits that will eventually protect you from some of the hard or unprecedented situations of life, one such being COVID-19.
Life being unpredictable can throw you off course in an instant. To keep you protected in situations like these, one must have a better financial understanding. Portions of Millennial are generally financially self-sufficient because of their guardians or low self-generated income but proper investment strategies can assist them in managing the money side by side helping in building a bigger corpus. Aside from regular income, investments can significantly increase cash flow & long-term savings. The corpus built through prudent investments will keep afloat in difficult times.
Since risk exists everywhere, millennials must begin investing wisely. Understand the power of compounding to grow wealth through proper investment channelization. Therefore, investment needs to be done as soon as possible. Early investment will in turn with a lot of time in your hands thus making your investment more agile during volatile market conditions.
Millennials invest their money differently compared to how their parents’ invested money. They have a higher risk tolerance and often seek innovative investment products and strategies that can provide them with guaranteed returns or higher market returns than some of the traditional investment tools.
Options Millennials should consider while setting up their investment portfolio:
Guaranteed Savings Plans
A guaranteed Savings Plan is typically a non-participating policy that intends to assist an individual to accomplish their life objectives by offering a secured protection cover against adverse situations and creating an assured return on savings. These life insurance policies allow one to make regular payments in the form of monthly or annual income for a specific tenure.
Unit-Linked Insurance Plan (ULIP)
Putting resources into a ULIP accompanies the different advantages - accomplish the objective of abundance creation for your family alongside a life cover. Use different benefit options, plan options, and investment options available within the chosen product depending upon your risk appetite.
Public Provident Fund
One of the most traditional investment tools and more secure choices is PPF. It is a risk-free investment and the interest one receives on the amount at the time of maturity is entirely tax-free.
National Savings Certificate
The National Savings Certificate (NSC) is a fixed-income investment scheme that you can open with any post office branch. The scheme is a Government of India initiative. It is a savings bond that encourages subscribers – mainly small to mid-income investors – to invest while saving on income tax.
The term direct equity refers to investment in the stock market directly. To directly invest in the stock market, you need a Demat and trading account. This account allows investors to buy shares/stock of the company directly from the stock market.
Protection Products that include health cover can assist you in fighting any critical illness with high-quality treatment without having to worry about finances. Protection products, such as term insurance, are essential for any millennial because they provide financial security for your family in your absence. Protection products also provide significant tax advantages, as premiums paid on insurance policies are deductible under Section 80C of the Income Tax Act.
It would not be an overstatement to say that the millennial population will rule the world – sooner, rather than later. It is already beginning to call the shots in India, home to the world’s youngest population, comprising more than one-third of the total population and almost half the workforce, which showcases that Indian Millennials are in the phase of financial decision-making.
In today's fast-paced world, Millennials value instant gratification. Taking money out for investments is difficult for Millennials because societal criticism and peer pressure force them to spend more than they save for tomorrow. However, because of their age bracket, this can be the best phase to begin planning for financial security and invest money more diligently.
Akshay Dhand, Appointed Actuary, Canara HSBC Life Insurance.