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How can millennials start saving?

  September 3,2022

How can millennials start saving?

Investing seems like rocket science for a millennial, but it's not. So let's understand who millennials are? Millennials belong to that age group who were born between 1981 and 1996.

There were times when savings were the priority, and taking debt was like a sin. Nowadays, easy access to loans makes a millennial spend over their means. Spending influenced by social media, looking rich rather than being rich, or insecurity regarding jobs could be the reasons behind spending without a budget. Savings and investments must be a part of their lives, as taking excessive risks may not be an option after a few years.

There are a few tips on how a millennial can start investing their hard-earned money;

Live within your resources

Irrespective of your monthly paycheck, you need to limit your expenses within your resources. You may use credit cards during emergencies, not for fulfilling your wants.

However, buying things on EMI is common these days. Using excessive EMIs options may affect your credit score adversely as the future is fully unpredictable. If you cannot pay your EMIs, it will become debt stress for you and your family.

For example, if your salary is around Rs.20,000 per month, you want to buy a mobile phone for Rs.50,000. Taking the plunge might not be wise if you haven't saved for it. It may satisfy your social status cause, but debt stress may destroy your peace.

Apply 50:30:20 rule

It is a wonderful budget rule for managing personal finance and might help imbibe the habit of budgeting and savings. You may take the help of such a rule to make your finances stable and alter the ratios according to your needs and financial objectives.

According to this budget rule:

You can spend 50% of your income on the basic necessities, i.e., unavoidable expenses, like-

  • Rent
  • Grocery and Utility Bills
  • Children's education fee

You may spend 30% of your income on your wants. Recreation is part of a happy life. You can spend 30% of your income on these expenses, like;

  • dining out with family,
  • trips with your friends and family, and
  • buying gadgets under your budget.

Basically, it includes those expenses that are beyond necessities.

You can invest 20% of your income. It will help you get returns to hedge the prevailing inflation in the country.

The most essential and valuable feature of such a rule is individuals can use it irrespective of their gross income. Moreover, you can personalise the ratio as per your needs and financial objectives.

As per your risk tolerance and financial goals, you can start investing in mutual funds through a systematic investment plan (SIPs).

Buy a health insurance policy

Changing eating habits, increasing pollution, adapting comfortable lifestyles, and passing genetic diseases are enough reasons to be financially aware and buy health insurance. An early health insurance plan is necessary for millennials as health insurance plans cover pre-existing conditions after a lock-in period of 2 to 4 years.

Creating emergency fund

Data represents that most of us are not prepared for emergencies like the Covid-19 pandemic. According to a report on Business Line, 21% of Indians claim to have taken on more debt to cover expenses during a pandemic. An emergency fund of 3 months of expenses is essential to tide over unpleasant surprises of life such as job loss or healthcare crisis.

However, the ideal amount in the emergency fund may vary with liabilities, financial responsibilities and the risk of losing the job. You may increase your emergency fund amount by analysing your current financial situation.

Start a Systematic Investment Plan (SIP)

One of the many ways to start your investments is with SIPs. SIP is a method of investing in mutual funds in which you invest a particular amount in a mutual fund scheme to generate a reasonable return. You need to shortlist the type of fund such as equity-oriented, debt-oriented, or hybrid schemes that you want to invest in. You must decide your risk tolerance capacity and financial objective of investing such money.


You can start investing by following the points mentioned above. Living within your means, investing in a disciplinary manner, creating emergency funds as per your requirements but for at least three months of expenses, and following budget rules is no rocket science.

This blog is purely for educational purposes and not to be treated as personal advice. Mutual funds are subject to market risks, read all scheme-related documents carefully.