MONEY CHOICES YOUNG EARNERS MAKE AND WHY?
1. Ground reality
· Parents of young earners tell them to save for their future, which the youth consider as preaching.
· When told that this is the right age to start saving for retirement, it seems far off and unimportant for the youth.
2. The youth avoid having to save as it reflects apprehension about the future.
· The youth does not see its future with the pessimism their parents or grandparents had.
· They feel confident about their earning abilities and finding jobs, changing vocations to pursue dreams.
· Therefore, saving is not their natural behaviour while spending is.
· They need to be guided towards putting aside pre-emptive savings for a rainy day.
3. The youth want to take charge of their lives and like visibility for the future.
· They like to fight the demons of wrong choices regarding their education and career themselves.
· The top goal for which they need money is the corrective action, without funding from parents.
· The incentive to save comes naturally to them for an immediate personal goal.
· They need counseling that helps them put aside a portion of money to do this.
· They have to be protected from straying to make quick money for their personal goals.
4. The youth avoid saving because the trade-off is unacceptable.
· Not many youngsters make money choices rationally and objectively, as the happiness quotient is low.
· The young earners find it financially tough to choose between:
· Purchasing an expensive designer label and clothes on sale
· Buying a second hand and a new vehicle or
· Paying for ambience or simply good food.
· They need counseling in making choices that help them, and not persuasive advice that is judgmental.
5. Several young earners do save but are not well-informed of investment choices.
· They think that an equity mutual fund will fund their education in a few years, without understanding market risk.
· They don’t know that capital protection is needed for money that they need at a short notice.
· They buy costly insurance for saving taxes, without realising that the return is abysmally low.
· They plan to buy a house thinking it is an appreciating asset, without considering the possibility that they may need to draw on the asset soon.
· They need to know that each investment comes with a specific return, liquidity and risk features and that the choice has to align with their foreseeable needs.
· They may not be able to take risks even if they have age on their side, if they do not have the cushion of accumulated wealth.
· The youth need conservative, liquid, flexible investments, and a small amount in equity, which they need not access for a long while.
· We need to help them spend, save and invest as per their needs, by helping them figure out these aspects.
· However, there is no need to drown them with fearful tales of caution, or complicated jargon.