The millennial generation (those born between 1982 and 2002) has been widely analysed and extensively written about. They have a mixed reputation. On one hand, they are considered extremely talented, creative, ambitious, and tech-savvy, while on the other hand, they have been called a pampered generation, unwilling to put in hard work. Since they have been brought up in the era of instant-everything, they feel entitled and often lack the patience and forethought, required for matters like investing and wealth creation for the long-term.
Here, we shed light on some of the common myths that millennials have about money.
- Myth 1: One Can Get Rich, Fast
Some millennials have a notion that it is possible to get-rich-fast. Be it through job hopping or working at a multi-national or pledging money in multi-levelmarketing schemes, or buying lotteries, etc. However, this is nothing but a myth and a mindset that makes them vulnerable to mis-selling. In reality, wealth creation is a long and meticulous process. It takes disciplined saving and prudent investing.
- Myth 2: Paying Taxes Isn’t a Big Deal
Taxes are what keeps the country running. Everybody pays taxes. If your salary slip says you don’t pay any tax, wait for your CTC to increase. Besides, tax on salary is only one of the many taxes we pay. For example, when you buy goods and services, you pay (indirect) taxes, when you receive interest on the money in your savings account above Rs. 10,000 in a fiscal or fixed deposit, you pay a tax. Hence, tax planning should be a key consideration while making financial decisions. Robert Kiyosaki, in his 1997 classic, Rich Dad Poor Dad, recommends starting a side business to offset the impact of taxes.
- Myth 3: All Forms of Debts are Bad
We live in times when loans and cash advances are easy to come by. ‘Attractive offers’ are indeed attractive, and it is difficult to resist the lure of a 0% EMI. Availing a loan is not bad. In fact, borrowing is good, but borrowing beyond one’s means is not. Also, borrowing to meet your needs is good, but borrowing to fuel your wants is not.
The question to ask yourself is – Am I buying something that will help me get ahead? Is it an investment? That will offer returns? For example, learning a new skill, buying a laptop for freelance projects, etc., are investments and not expenses. This is a good debt. Go for it if you can repay comfortably.
- Myth 4: Stock Market are Unsafe
For a generation that likes to explore and experiment, it is surprising that a lot of millennials think that investing in stock markets is unsafe. This is perhaps the most expensive myth, for it hampers long-term wealth creation.
Yes, there are risks associated with investing. But then, not investing can also be dangerous. Keeping your hard-earned money in a savings account can see you get negative real returns if inflation is higher than savings account interest rate. Investing in equities, via professional fund managers, like mutual funds have, can help you gain in the long-term. You must aim to get real returns (after accounting for inflation and taxes). Moreover, the markets, mutual fund companies, and intermediaries are regulated by agencies like SEBI. There are strict rules and provisions to ensure that investor interests are safeguarded at all stages. Learning to manage money is an important life skill and investing smartly, is a key aspect of this.
IDFC Mutual Fund offers you several schemes and platforms to get started. Visit www.idfcmf.com for more details.
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