Millennials have always been perceived to be a generation that believes in `living –in the moment’, unlike their predecessors who were more inclined towards protection and preservation of wealth.
This generation also considered instant gratification and easy monthly installments as the main mantra of happiness. In fact, according to Tata Capital’s flagship report The Millennial Pivot (2019), Millennials and GenZ considered savings and investments as an important part of their financial planning, but did not measure instruments like insurance a priority.
So low was the significance of savings for emergencies and contingencies that only about 17 percent millennials preferred investing in an insurance policy and almost 34 percent of the lot considered bank deposits as appropriate ‘investment instruments’.
The global pandemic, however, seems to have changed that trend with lockdowns, travel restrictions and social distancing becoming the new normal.
With overnight layoffs, pay cuts and a total economic activity shut down for almost five months now – they have been forced to rethink their finances.
Saving is over-rated no more!
The pandemic induced lockdown gave millennials a chance to introspect and reevaluate. Keeping the economic ramifications aside, it was the perfect break that fast-paced life needed.
Millennials and GenZ were finally living the life their parents and grandparents lived. Cooking, household chores and spending time with family – these mundane activities not only gave rise to new hobbies but also a hard look at individual choices.
Take for example Ajay, a business analyst, who realized that out of his monthly salary, his rent and groceries comprised hardly 40 percent of his income, whereas the rest of it went in spending recklessly on luxuries that he didn’t require or could avoid.
Whereas Rishi, an ardent follower of living in the moment, realized that he should have taken the concept of savings and emergency funds seriously after his employer refused to pay him any salary during the lockdown. While these are two instances out of the many, it can help give us a fair idea of how the ‘confused and impulsive’ millennial generation has finally learned to blend in the teachings of their forefathers with the experiences of the new world.
Rethinking Financial Priorities
It has been five months since the pandemic gained speed in India. In all probability, we are going to be in this for another quarter at the least. While we are in this ‘New Normal’ it is important to keep in mind some basic financial tips to adapt to this new environment.
These tips are created after a deep study of millennial behavior and spending habits.
The pointers below will thus help every millennial and GenZ create the optimum balance between cultivating a habit of savings and fulfilling their need for instant gratification.
1. Insurance: This is a small investment that can reap great long term benefits. Additionally, considering how natural disasters around us are increasing as we speak, this is also an asset that can save you from great financial difficulties in the future. As a matter of fact, the current pandemic has just helped in amplifying the need of maintaining an insurance portfolio.
Every individual no matter what stage of life he/ she maybe should make it a practice to regularly invest and update their insurance coverage. An insurance policy should be taken based on careful consideration of one’s individual lifestyle, habits, health history, dependent family members, claim settlement turnaround time and amount of coverage. In the new normal that we are now settling into – insurance cannot be an option anymore, it has to climb up the ladder and become a priority.
2. Emergency Fund: You need not compromise on your current lifestyle to create this. While an emergency fund is extremely important, lest we end up in such a situation again – this can be easily achievable by rejigging your current expenses a bit and earmarking a small portion towards this fund.
Reducing credit dependency: Plastic money and purchasing on credit, though in the present can feel good and liberating – has the potential of driving you into a convoluted dark hole of debt. An individual at all stages should try to keep his/ her credit liability at a minimum and try to avoid credit purchases as far as possible.
3. Invest in assets: Using the money that you earn is wonderful, however, being able to use the returns of your investment can guarantee you a good lifestyle as well as a corpus for your grey days. Thus, you should inculcate a strict regime of investing some money in assets like stocks, gold, mutual funds, or bank deposits that generate money as they grow. This was you can develop a source of passive income for yourself that can come handy in an event of any unforeseen circumstance in your current income stream.
4. Alternate income: Lastly, this pandemic has helped us all realize the importance of having passive income or an alternate income stream. According to a study by the University of Chicago, it was estimated that approximately 139 million Indians would run off their savings by the end of June 2020.
As a country of 1.3 billion people, this was nothing short of a humanitarian crisis. Thus, it is extremely imperative that one has a steady income coming in at all times. This may not be possible at an early stage when one has just freshly started their career. However, it is prudent that an individual starts building avenues for passive income from his/her first paycheck itself to cushion themselves from any future blows that the economy or environment may throw.
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