With a young population, attractive entry level salaries the likes of which were beyond the imagination of their parents, the segment of young earners presents a huge opportunity to IFAs. Jayshree Pyasi gives a few pointers on the I-pod generation
Even though the I-pod generation is well paid, they are often insecure, debt ridden and confused and need the guidance of an able financial advisor. Also, the priorities of a young earner are way different from those of someone who has been earning for a few years.
However, the fact remains that almost all their major long term goals can be met if young earners follow a disciplined approach towards financial planning. These are some tips that can help you to advice young investors.
Balance between budget and life
The easy route that most of the young earners take is to worry about finances and security later, but eventually any overspending or lack of provision will catch up with them.
As an advisor you need to push your young investor into good habits now. This means steering clear of debt and making them save regularly so they are at least heading in the right direction to reaching their financial goals.
Payback now and save later
Many young earners at the earlier stage of their career are burdened with student loans. And that is the biggest load on their mind.
If your client can afford to make additional payments encourage them to do so as it will reduce the term of the loan and ensure they become free of student debt sooner and get on with savings and investments.
Savings
Many people in their twenties feel they do not have enough money to live on, let alone set aside for a nest egg. But by getting them to start a SIP even if the amount is as low as Rs. 500, you will inculcate a healthy practice. Just make sure that SIP is for a long term horizon scheme.
Cash safety net
Try to get them to save enough money to cover three months worth of their monthly costs. This is not an investment but rather a safety net to protect them against unforeseen events and expenses. This prevents them from having to sell growth investments at the wrong time if they have an emergency in future.
Encourage to invest aggressively
Encouraging younger investors to save as much as they can - and then invest as aggressively as they can stomach - should be a consistent message from your end.
For younger people, their biggest asset is their potential income stream and their capacity to bear risk is very high. If they are in their 20s they could easily be 100 per cent in stocks or equity and afford to lose 40 per cent and still make it up in their lifetime.
Retirement seems eons away
Young earners have a mindset that thinking about investment and saving is not cool and instead it makes feel settled and middle-aged. As, an advisor you need to make them see it differently: that if they invest a little each month now, they won’t have to invest a higher amount later if they wait for another 10 or 20 years. Make them start early with whatever they can as that would make life so much easier to manage later.
