Young Indians today have a different relationship with money. Their coming of age coincided with the beginning of India’s digital revolution. And then there were life changing events. Events like the pandemic grounded their expectations. And at the same time, the startup boom made them hope for a brighter future. “It was the best of times, it was the worst of times.”
Today, Gen Z individuals are entering the workforce and the financial world with a completely evolved financial mindset. Any advice on personal finance for Gen Z-ers should respect THEIR way of seeing money and then aim to polish their perspectives.
If you are a Gen Z individual, read this blog post and take advantage of the actionable framework that will help you manage your personal finances a bit more confidently.
Identifying Risks and Leveraging Growth Factors for GenZ Wealth Building
As you embark upon your wealth creation journey, educate yourself on the basic principles of finance – the risks and growth factors – and how they are intricately woven with our life choices and goals.
1. Telling ‘Needs’ from ‘Wants’: The Backbone of Personal Finance Management
Let’s talk about that eternal money puzzle – needs vs wants. For young Indians today, it’s trickier than those basic examples we learned in school. Sure, food and rent are ‘needs,’ but what about that Netflix subscription you use to unwind after a long work day? Or that co-working space membership that helps you be more productive?
Living with family might save rent money, but maybe getting your own place means better peace of mind and independence. That new phone might seem like a want, but in today’s remote-first job market, it could be a legitimate work tool.
As you can see, the line gets blurry. Your parents might see dining out at a decently upscale restaurant as a luxury, but you as a Gen Z individual might NEED to dine out in order to establish meaningful connections with people in your industry who might help you find the next job or gig opportunity.
The key is to make sure that you are aware of the choices that add real value to your life and have mid to long-term benefits as well. Maybe you’re happy with a basic phone but value a higher-end mobile handset because that lets you work effectively even on the move. Or, you might skip food delivery to save up for upskilling courses. It’s about making trade-offs that make sense for YOUR life, not someone else’s.
2. Save First, and Then Spend
Think of your salary like a cup of chai – the first sip should go to your savings, not your shopping cart. But yes, we get it – when that first salary hits your account, those Instagram ads become extra tempting.
Here’s a fresh take on the “save first” rule that actually works for young Indians: The day your salary arrives, move some money instantly to a separate savings account. Think of it like switching off notifications for that money – what you don’t see in your main account, you won’t spend. Even ₹5,000 a month is a solid start.
Some tricks on personal finance management or GenZ that work better than the old-school “don’t spend” advice:
- Set up an auto-debit the day after your salary date
- Use a different bank account for savings (bonus: better interest rates)
- Name your savings goal something specific like “My First Investment” instead of just “Savings”
- Keep your savings account off your UPI (this is a game-changer!)
The beauty of saving first? You can actually enjoy spending what’s left without feeling guilty. No more end-of-month stress about not saving enough. Plus, watching your savings grow is oddly satisfying – like completing a Netflix series, but better for your future.
3. Start Small, but Start Investing Early
With your savings routine in place, the next logical step is to start your investment journey. While your savings account offers security, it’s worth considering options that can help your money grow over time. The good news? You don’t need large sums to begin.
Now that you have built your emergency fund, consider investing some of your savings. You can start with as low as Rs.500 monthly in a mutual fund SIP. This is a meaningful first step. Many Gen Z Indians believe that investing a small amount of money will generate nothing substantial. However, beginning your investment journey rather than waiting for the perfect moment makes more sense.
You can start index funds that track major indices and then gradually move towards a narrower group of stocks. Starting your investment journey early gives your deployed capital the power of compounding.
4. Don’t Forget About the Taxes!
If you are still reading this article, chances are you already have a decent amount of monthly income. If that is the case, start planning for tax savings early on in your career. If you are not well versed with the difference between the old and new tax regime and which one is best for you, consider talking to a wealth manager or a CA.
The new tax regime is gradually becoming a default. Under the new tax regime, you will be paying significantly lower tax rates. Employer PF (12%) and NPS (14%) contributions remain tax-free up to ₹7.5L annually. Housing loan interest and 30% standard deduction on rental income continue. The regime offers complete investment flexibility, allowing capital allocation based on personal goals rather than tax considerations. However, some of you might still want to take advantage of deductions available in the old regime. Talk to an expert to find out what works best for you.
5. Start Planning for Retirement in Your 20s
Starting to think about retirement in your 20s might seem like planning a trip that’s decades away. But here’s why young Indians should consider it – the power of starting early is incredible, even with small amounts.
Think about the changing Indian family structure. Unlike our parents’ generation, we might not want to rely entirely on our children or traditional support systems. Meanwhile, life expectancy is increasing, and lifestyle aspirations are evolving. Starting retirement planning early gives you more control over your future.
NPS (National Pension System) is worth considering. It offers tax benefits and lets you choose how aggressively you want to invest. Even a small monthly contribution, say ₹2,000, can grow significantly over 30-35 years.
EPF (Employee Provident Fund) is another foundation. While it’s mandatory if you’re in the organized sector, consider it a forced retirement saving rather than a burden. Some companies even offer NPS in addition to EPF.
But retirement planning isn’t just about pension schemes; your other investments – mutual funds, stocks, or even real estate – can be part of your retirement portfolio. Consider using a retirement calculator to calculate how much money you will be needing when you retire in order to live life on your terms.
6. Don’t Go Overboard With High Risk Investment Options
As a Gen Z, you have the luxury of time. Even a high risk investment can yield good returns if you give it time. Also, if you have the luxury of time, your risk-taking appetite generally remains high. However, please don’t go overboard with high risk investment options. For example, Futures and Options can be used as a hedge against negative returns generated by your traditional stock investments. But if you use it as a get-rich-quick scheme, you will burn your fingers.
7. Invest in Yourself, Invest in Upskilling
Thanks to the rise of generative AI and an overall downturn in the job market, the Gen Z people are suffering from a horrible uncertainty as far as their career is concerned. You can only invest or save if you have money, if you have a steady income. Allocate money for upskilling and learning. The job market is rapidly evolving. Invest in courses, certifications, and skills that can increase your earning potential. Consider this an investment in your human capital.
The Bottomline:
Do you know why we try to invest, save and spend as wisely as possible? To have a happy life, to keep our near ones happy and to achieve certain goals in life. Never forget this purpose. Yes, spreadsheets and budgets have their place, but they’re merely tools in our financial toolbox – not the masterpiece we’re trying to build. The real endgame? It’s about crafting a life where you can exhale freely, knowing your family is secure. Where you can be present for those irreplaceable moments without a constant undercurrent of financial anxiety. Truth is, when we look back someday, we won’t be counting rupees – we’ll be remembering the lives we touched and the footprints we left behind. Now that’s what we call a return on investment.
-Marifur Rahaman
