5 THINGS GENZ SHOULD KNOW ABOUT PERSONAL FINANCE

Gen Z is the first generation to have grown up in a digital age. In contrast to earlier generations, today’s technologically advanced world has bestowed new values and a unique worldview to this generation. Gen Z has the chance to learn from past mistakes and seize the opportunities presented by the modern world in a setting where millennials have been dubbed the poorest generation of all time.

Financial planning and direction for the younger generation haven’t been widely adopted because the financial sector has long been focused on affluent people who are just beginning their retirement. Getting facts and information from reliable sources is becoming even more important in a world where anyone can post financial advice on social media. While Gen Z may have different perspectives on money than previous generations, some timeless lessons can still be applied to this generation.

An Early Start Gets Optimal Returns

No time is early to start investing or thinking about your retirement. In this information age, Gen Z is quite familiar with the concept and power of compounding.

Still, to make it simpler, let’s say you were to invest Rs 100 at a 10% interest rate. A simple interest rate will yield Rs 10 yearly and can double your money in 10 years. However, with compounding, you earn interest on your principle and your earned interest. So, for the first year, you get 10 rupees. In the second year, you get an interest of Rs 110 (100+10), and so on. You can double your money in almost severs years with the same interest rate.

Starting at an early stage gives more time for your money to compound and grow. So instead of thinking about a time to start investing, you should get started right away.

Acquiring Assets And Not Liabilities

Looking at all the self-made millionaires, you will find that most of them have reached this position by acquiring assets that generate income for them. Assets are those which put money in your pocket, while liabilities are those which take out money from your pocket over time.

Let’s take an example of a house; people have always pursued the goal of owning a home but is it an asset or a liability? The house’s value appreciates over time, but it does not put any money in your pocket until you sell it and re-invest it to generate income. Instead, it takes money out of your pocket for upkeep and maintenance.

Moreover, you might take a line of credit to pay for your house and be in larger debt. A famous quote from a favourite book, Rich dad, poor dad, goes, “make your money work hard for you.” You don’t want to work for the rest of your life to earn your livelihood. The goal is to invest the money you earn in acquiring assets that can generate regular income for you.

For example, if the same house is on rent, the liability becomes an asset as it starts regularly putting money in your pocket. If you keep acquiring such assets, eventually, your income becomes sufficient for you to stop thinking about work and enjoy your life.

Need an example for equity investments like Rs9000 invested in Infosys during its IPO is now more that Rs 9 cr now

Everybody Needs A Financial Strategy

Generation Z people are digital natives who grew up with applications and calculators for nearly everything. While some self-awareness and independence are beneficial in many respects, looking for support and specialised help is equally important.

It could be helpful to discuss how financial assistance can lead to better and more individualised loans and banking choices. Additionally, such guidance will make it easier for Gen Z investors to understand whether self-service is an ideal choice for them or not. Having a financial strategy promotes healthy personal finance habits and a secure future.

The Power Of Diversification

Diversification refers to investing money in several investment vehicles, industries, or marketplaces to minimise risk and avoid concentrating on one area. By diversifying your investments, you can ensure that the gains from one investment can offset potential losses from another. No matter what investments you select, it is essential to diversify effectively.

You can increase the potential income from your portfolio by investing in several various forms of investment. Stocks, bonds, real estate, commodities, and other forms of investment are examples of different asset classes. You can also invest in a Public Provident Fund (PPF) or a National Pension Scheme.

Patience Is Key

In the age of fast-paced technology and an enormous pool of information, everyone is trying to get rich fast. However, wealth creation takes time and requires patience.

You cannot put your money in stocks today and expect it to double by next year. If we look at the past five-six decades, equities have given a return of 15% or more per year and if you show patience with the market, it will reward you with excellent returns on investments despite short-term falls.

Takeaway

In the society we presently live in, it’s crucial to grasp the language of money so you can make the most meaningful choices for your future. The oldest half of Gen Z is starting to enter the workforce.

Much knowledge is available online, but by seeking information from a dependable source and keeping these lessons in mind, you can become financially independent much earlier.

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