Growing up in an Indian family, it is very likely that your parents taught you the “value of money” in more ways than one. Yet, a lot of millennials are at odds when it comes to managing their money. This is probably because the previous generations dealt with financial challenges differently. One of the reasons perhaps is that the financial issues and goals were not discussed openly and sticking to traditional investment avenues was the norm. However, is doing the same going to help you as well?
Today, probably our needs have increased and we may believe we have considerably different set of responsibilities when compared to those of our parents’ generation. Moreover, there can be a confusing range of investment avenues out there which can be a task to mine through. Perhaps that is why, you sometimes find yourself wishing that your parents had taught you some basics of smart money management before throwing you at the deep end of life’s responsibilities.
Here are five things about money management you probably wish your parents had taught you:
You can start small
Small can be big, if done the right way. You do not need to have a lot of money or be an adult to start investing. If you are in a position to set aside a small amount of money for each of your financial goals every month, you may be ready to dive into the world of investments. You can start by investing as little as Rs 500 every month which can help you build your nest egg in the long run.
Beyond traditional investment avenues
It is prudent to explore various financial avenues before investing. While traditional avenues continue to prevail, one must also look at newer and possibly better avenues for investments. A Systematic Investment Plan (SIP) is one of the most convenient methods of investment. It is a tool through which you can regularly invest small sums of money in a mutual fund. This can help you invest in a disciplined manner and achieve your financial goals, over a period of time.
Money does grow
While money does not grow on trees, the power of compounding is a potent tool that can help money grow. If you invest your money periodically in investment avenue, you can grow your wealth over the years.
Consult a financial advisor
Ensure you go to a certified and experienced financial planner because he can advise you on how to allocate money to various investment options depending on your goals and ability to take risk. Be transparent about your financial situation because only then can he resolve your financial issues and recommend the right investment products.
How much your parents earn
Most parents keep their personal finances hidden from their kids. Due to this, when kids grow up, their idea of family income and its management is fairly skewed. It is important to teach children about personal finance. You can encourage them to be a part of the decision-making process by starting a SIP in their name and telling them that you’re saving for their future.
The writer, Karthikraj Lakshmanan is senior fund manager, Equities, BNP Paribas Mutual Fund