Your 20s are all about struggle, career growth and working towards overall stability, especially financial stability. You have just started your professional career and are working towards building a life, a life that will eventually be shared with your loved ones.
The 20s are also about building a financial portfolio. Young investors are generally characterised by long-term goals, apt-risk appetites, diversified portfolios and fast investments. They invest aggressively, are willing to take good saving risks and build a decent portfolio before they start a family.
As important as investing is to benefit from the market movements and build wealth fast, it is equally important to put your money into stable and lesser-risk saving plans for young adults to build an assured corpus. Similarly, it is necessary to plan long-term investments, and it is equally important to ensure optimum savings for the short-term goals.
Market-linked investments are great for long-term wealth creation. Markets are volatile in the short term; however, long-term investments allow for rupee cost averaging and balancing out of any major lows with an equal number of high Thus, investing is perfect for long-term financial planning. However, for short-term goals, such as marriage in the next 2-3 years, building an emergency fund, saving up for a sabbatical for upskilling, etc., you need a money savings plan with assured returns.
Thus, young investors should also put effort into building a savings corpus. Let us look at a few reasons why savings are more important than investments for young investors.
Here’s Why Young Investors Should Save More
- Baby steps into investing: Most young investors are new to market-linked investments. Very few have the required knowledge and skills to succeed from the get-go. Therefore, it is better to start with simple savings and build awareness about financial matters and investing.
Once you have acquired some basic knowledge, you can start investing in the market. Even then, start with investor-friendly avenues, such as mutual funds, Equity Linked Savings Schemes (ELSS), Unit Linked Insurance Plans (ULIPs), etc.
- Build an emergency corpus: Once you start earning, it is vital that you draft out a detailed financial plan. And one of the important elements of a financial plan is an emergency corpus. The recent pandemic highlighted the fickle nature of our jobs. Most young professionals were either laid off or got major pay cuts. In such scenarios, it becomes important to have at least 6 months' worth of monetary resources available in an emergency fund.
Prepare a financial forecast and ascertain how much money you require, as per your standard of living, spending patterns and necessities, to survive one month without a salary. Multiply that by six. That is how much you should have in your emergency fund. As it is an essential corpus, it is better to create it through savings plans with assured returns than investing.
- Current and upcoming liabilities: As a young professional, you might have education loans that need to be repaid. Additionally, you may be looking to take a home loan or a car loan. You may have credit card debts.
As already discussed, you need to be prepared for any periods of no/low income. You can start saving up for a separate corpus to help you pay your loan instalments in case of loss of income. And in case you have a stable, well-paying job, the accumulated savings can help you prepay the loan and get rid of the debt burden
- Down payment: Once you start getting a stable paycheck, you will want to buy a two-wheeler or a four-wheeler. You may also want to purchase your own home. All these require a sizeable down payment, especially a house.
You can estimate the approximate amount required and start saving up in money-saving plans so that you are assured of a fixed payout.
- Stress-free savings: In your 20s and 30s, you already are stressed about proving yourself professionally, starting a family, taking care of the family, maybe upskilling yourself, buying a home and/or vehicle and so on. You do not need to worry about your financial corpus by putting all your eggs in the market-linked basket.
Having a few savings plans that offer guaranteed1 returns allow you to rest assured about a part of your money. For emergencies and critical goals, saving your money on lesser-risk products allows you to lead a stress-free life, knowing that if needed, your saved-up corpus will be available for you.
Savings + Protection with Life Insurance Savings Plans
Now that we have discussed the importance of savings for a young investor, it is important to look at some popular savings avenues. Fixed deposits (FDs), recurring deposits (RDs), and savings accounts are conventionally popular and most opt for products for hassle-free and stress-free savings. Similarly, government schemes, such as Public Provident Fund (PPF), National Savings Certificates (NSCs), Post Office Savings Schemes, etc., are also used extensively for building a savings corpus.
One more important product that allows no-risk savings is an insurance savings plan from life insurance companies.
As a young professional, you may have some loved ones who are financially dependent on you - elderly parents, siblings, spouses, children, etc. Even if you build a large savings and investment portfolio, you need to ensure that they are taken care of in your absence as well.
Life is uncertain. Will your family be able to sustain the lifestyle in your absence? What about your parent's medical expenses and other needs? Will your unfortunate demise leave your family riddled with debt? The best way to quell all these fears is to get yourself adequately insured with a life insurance plan.
Life insurance savings plans combine the benefits of life cover and guaranteed1 returns on the money invested. The premium you pay for a money savings plan is put in non-market-linked avenues, thereby assuring you of guaranteed1 returns.
At Tata AIA, we offer a wide range of specially curated life insurance savings policies. With our wide range of online calculators, you can find the best saving plan for young adults to not only secure their families but also save for their dreams and financial goals.
With Tata AIA savings plans, you get guaranteed1 returns plans, monthly income plans, regular income plans, money-back plans and so on. Choose the one that matches your savings goal and financial requirements.
For more information on Tata AIA life insurance savings plans, you can get in touch with our insurance experts today.