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- How small savings in your 20s may give you huge returns later in life
How to Save Money in Your 20s for a Stress Free Retirement
Every generation sees youth who manage to find employment early and start earning a salary when they’re barely out of their teens and are probably too young to know how to spend the money wisely. They tend to put off the idea of saving for later and go on to live for the moment. You could be one of them yourself.
Now, enjoying the life you have right now is not wrong; in fact, it is by far preferable to dwelling on the past or worrying about the future. However, life lessons and good old arithmetic indicate that a little money saved along the way can work wonders for you later on in life. Learn from old-timers, who often regret not making wise financial decisions in their breadwinning years!
If you have freshly joined a job or profession, you may be free from the worries of household management, health costs, children’s education etc. So, it easier to set aside a small portion of your earnings and invest it smartly with a long-term future in mind.
With only a few baby steps into the world of investments, you can let your money grow on its own and support you in your post-retirement life. Let’s see how.
Safe bets that snowball your money
As a young earner, the good thing is you don’t need to invest in a savings plan for very long. To start with, you can invest through HDFC Bank in Inflation Indexed National Savings Securities with a minimum amount of Rs 5000 and a maximum of Rs lakh in a year. These investments are linked with the inflation rate and offer a minimum guaranteed interest. All you need to do is reinvest the principal and compounded interest received on maturity, and you’ll see your money increase over the years.
For example, if the maturity period for the scheme is five years, you can choose to reinvest your first year’s savings along with the interest thereon in the sixth year. You will thus have a decent sum matured and ready to be invested at the beginning of the sixth year. Of course, saving up is a habit; if you get used to it, looking beyond reinvestment and setting aside some fresh savings every year is not too tough a task.
On the other hand, if you’re ready to forgo the tax benefits of Inflation Indexed National Savings Securities and want to eliminate risk, you could invest in Savings Bonds through HDFC Bank. These offer an interest rate of 7.75% p.a. and have a 7-year tenure from the date of issue. So, by the time you hit 40, it is possible that your first year’s savings could have tripled – if you reinvested it in its entirety every time it matured! You can read more about HDFC Bank Savings Bond here.
All this can be done without upsetting your vacation plans, your weekend parties, or your dreams of buying a new sedan. What could be better?
Sizing up the market to line your pocket
The idea of small savings may not go with your exuberance and flamboyance. If you are in sync with the current economic, political, and financial landscape, you can use your knowledge to invest in schemes that are more exciting and can potentially offer better returns. These plans are linked more tightly to the market and therefore carry additional risk as well.
For instance, you can invest in various types of Mutual Funds through HDFC Bank NetBanking. This enables you to purchase, redeem, and switch funds at the click of a button. You can also invest in Initial Public Offerings (IPOs) through your HDFC Bank Savings Account and trade in Equity and Derivatives through an investment account. By partially or fully linking your investment to the market via Mutual Funds and shares, you can become a part of the economic growth and your money will grow as the market grows.
Some Mutual Funds do assure a fixed return in addition to market profits (if any). While opting for these, you should consider the ‘risk versus return’ balance that you’re comfortable with and decide accordingly. In share trading there are no predefined returns, but these investments can bring in a handsome profit if you carefully select and monitor your investment portfolio.
As a new entry into the workforce, you should consider the investment options available to you and choose wisely based on certain key factors – your expectation from the investments, the amount of risk you’re willing to take, the amount of money you are ready to set aside, etc. The higher the risk you’re willing to take, the higher the possible returns – and vice versa.
To help you make an informed decision in this regard, HDFC Bank in-house research team brings you the best of investment-related tips and information in the form of InvestTrack. This tool plays the role of your personal financial planner, and considers your risk profile, investment objectives, and financial goals before providing you with advice on investments.
InvestTrack offers you expert opinions, along with monthly updates and investment concepts. Equipped with this expertise and information, you can invest your money wisely and continue to enjoy life even in your twilight years, long after you retire.
So whats stopping you from investing today? Log into your HDFC Bank NetBanking Account and start savings now!
* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.
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