As this generation is soon to become the largest generation in history, Gen Z individuals need to look after their financial future and take steps to secure it. But, first, it is essential to understand their mindset to encourage them to secure their financial future.
Gen Zs are people who are born between 1995 and 2010. And this group has been shaped by technology—they’re the first generation to grow up with smartphones and the internet, and they’ve never known a world without them.
Generation Z has many advantages over the generations who came before them, including more financial resources and technology available to help them make smarter decisions about their money. With these things in place and their natural inclination to avoid debt and save, this generation may just be able to manage their finances better than any generation before them.
As we saw from previous generations, money management begins with proper education. The best way to do this is by making good financial choices early so they can see how positive results can come from it. The younger someone is when they learn how to properly handle money, the less likely they are to make mistakes later on in life.
We might like to think that Gen Zs are bad with their finances. But it might not be as bad as we may think.
In India, most of India’s Generation Z, whose oldest members are in their early 20s, are leaning toward saving money when entering a job.
According to a study by Viral Fission, a young community platform, people born between 1997 and 2012 are more likely to save money than spend it, roughly 32% of those surveyed opting to save money. A little over 23% of respondents, or nearly twice as many as indicated they would invest in cryptocurrencies, preferred the security of fixed deposits.
Importance of financial planning for Gen Z individuals
Gen Z is a generation that lives in the present and takes life one step at a time. They have distinct life objectives from their parents because they want better returns and quicker results.
Gen Z is more conscious of their spending and savings than prior generations. Most Gen Zers exercise financial planning in order to have a secure future.
Finding a balance between savings and spending and creating a solid financial plan is essential for a generation that loves to enjoy life “on-the-go” and believes that “you only live once.”
A financial strategy to get their money in order is essential for the younger generations. It is because the earlier they start, they will have time to understand what works for them and what doesn’t and accordingly adjust their financial requirements.
We’re talking about a financial plan that will include having an emergency fund and investing for financial goals. An investment strategy can ease your financial concerns as you age.
Here are some steps to secure your financial future: Avoid impulse shopping
One of the finest emotions is being notified that your salary has been credited to your bank account. Online businesses may easily entice you to check out their best-selling items, delectable meals, etc., in this era of push alerts.
It is easy to become an impulse buyer and get lured by an offer but afterwards second-guesses our choice. It is a good idea to wait between 24 and 48 hours after adding it to the online cart to determine if you still feel the desire to buy the item.
The first important thing in financial planning is building an emergency fund.
Figure out how much you’ll need in your emergency fund. It’s essential to have a concrete idea of how much money you’ll need for your emergency before you start saving. Typically, saving up to six months of your expenses is best in a contingency fund.
That way, you can avoid the risk of overspending and putting yourself in debt, which will make it more challenging—or even impossible—to build up your savings. For example, if you suddenly lose your job and have to pay for a new place to live and more expensive food, the money in your bank account might not be enough.
As a young person, you may think that building an emergency fund is a task. But, it is the first important step that individuals must carry out so that an emergency doesn’t throw them off course. It is best to keep this fund strictly for genuine emergencies.
After all, you wouldn’t want to spend the money you saved for that solo trip on daily essentials like food.
Importance of saving and investing
When people think of saving and investing, they often think of it as a thing done only by wealthy people. Many high-income earners do indeed invest in various investment options. However, it is possible for people who earn a modest income to invest and reap the benefits.
As a Gen Z, you might not have much money to start investing. However, you have something far more important on your hands. It is time. You heard it right! If you start investing early and stay invested for the long term, you might be able to beat a person who started investing late but invested a higher amount.
This is the power of compounding.
For instance, if you invest Rs. 500 at the age of 20 and keep investing the same amount till 60, you might end up with Rs.59 lakhs. We are assuming a 12% average annual rate of return. But, if you start investing at 40 and invest Rs.5000 per month, the investment value of your portfolio will be Rs. 50 lakhs. So, we can see that time is more important in investing.
We have seen that investing even small sums of money can grow into lakhs and crores when you leave them alone for long enough in the equity market.
Investing is an easy way to make your money work for you and to build up your wealth over time. If you are starting out with investing, there are a few things you need to know before taking the plunge:
Know what you are doing: Make sure you understand the basics of investing before putting any money at risk. You should know what kind of investments work best for your goals and personality and how to evaluate them. There are many helpful guides online if you need help getting started or want a refresher course on investment basics.
Get help when you need it: Investing is complicated enough, which is why many people choose to get help from an expert when they first start. While many financial influencers are excellently educating Gen Zs financially, it is also essential to seek professional financial advice. A good financial advisor can help guide you through the ups and downs of the market and keep you focused on your financial goals.
Setting and achieving financial goals.
Just like your academic and professional goals, financial goals keep us focused on what’s most important in life—not just making more money but spending and investing it in a way that can help us reach our long-term financial objectives. Who doesn’t want to feel like they’ve got a handle on their finances and are heading down the right path towards their future?
Now, you may not have the same long-term financial goals as your friends or your parents at your stage. And that is fine. Setting financial goals, whether for a solo trip or early retirement, is an important part of prioritising our money. The best way to ensure you are on track is to set these goals, create a plan to achieve them, and then work hard to stick with them.
New investment avenues
In the present scenario, there are several new investment avenues where investors can invest their money and get returns. A mutual fund is one of the popular investment avenues that have become popular among individual investors. As the minimum investment amount to invest in mutual funds starts at just Rs.100 per month, Gen Z individuals can also invest in mutual funds and move towards achieving their financial goals. Moreover, the completely paperless account opening, and investment process makes sure investing in mutual funds is within GenZ’s comfort level.
Whether it’s to pay for college or to purchase a car and a home, the importance of building a solid financial future is clear. GenZs seem the most practical of all the generations regarding their financial future.
They are keen to save for the future but also want to spend money on themselves. Hopefully, this will help them balance their hopes and dreams with their ability to achieve them in the long run.
Today’s youth will have growing opportunities to shape the direction of their financial futures, and they need to be aware of these opportunities to capitalise on them.
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