- Date : 06/12/2021
- Read: 4 mins
Are you guilty of making these financial mistakes in your 20s? Find out how to avoid them.
The twenties are an interesting time in one’s life. You are brimming with enthusiasm and youth, and there’s a world of opportunities ahead of you that can help you earn money and secure your future. However, a few common money mistakes can ruin not just your 20s but also the later years of your life.
So, it is highly recommended that you incorporate some simple money-making tips into your routine and avoid mistakes such as the ones mentioned below:
1. Not making your savings earn more money: If you are wondering how to earn money as a student, the simplest way is to save whatever money you get. Money saved is money earned. You can compare different investment and savings products like a fixed deposit or a recurring deposit, etc. The interest rates for these deposits can vary for each bank, so make sure to compare. It is important to invest or save your money in a high interest rate account other than your primary bank account to beat inflation and benefit from the power of compounding.
Pro tip: You can also use the Rule of 72 that indicates the amount of time it can take for an investment to double in value. You can calculate this by dividing the number 72 with the interest rate offered by the investment and accordingly make a decision.
2. Paying a huge interest on your credit card: Interest charged on credit card dues can eat into your savings. It forces you to pay more than what you borrow and shoves you into a constant loop of debt. It is important to be prudent when you use a credit card. While it may be beneficial to avail of discounts, cashback, and other deals, you must be wary of high interest rates.
Pro tip: Make a habit to pay your credit card bills in full and not just the minimum amount due.
3. Paying too much on insurance plans: It is essential to avoid money mistakes like buying a high premium insurance policy. Since the term of an insurance policy can be long, picking an expensive plan will get you stuck in paying a high premium for many years. If you want to avoid paying too much for car insurance, health insurance, or any other plan, search and compare different policies online and pick one that is the most affordable.
Pro tip: Most personal finance experts recommend getting a minimum health insurance cover of Rs 5 lakh.
4. Assuming you have no money to invest: If you are wondering how to earn money as a student in India, you should start investing. One of the most common money management mistakes at this age is to think you do not have enough to invest. There is no minimum amount when it comes to investing. You can start with very little. So, explore different investment options to earn cash and maximise your profits from a young age.
Pro tip: Start investing your leftover pocket money in simplified investment options like mutual funds. These offer the option to invest through a systematic investment plan (SIP) in regular instalments of as low as Rs. 500.
5. Thinking life insurance is too expensive: Remember that maintaining a healthy lifestyle can help you buy a reasonable life insurance plan at this age. Premiums are generally lower for younger people as they have health on their side. Moreover, it is important to look at life insurance as an investment for the future rather than an expense. Life insurance plans also offer other advantages such as income tax benefits. These savings can be further invested or saved for a future financial goal.
Pro tip: Most personal finance experts recommend getting a minimum term insurance cover that is at least 10 times your annual income.
Now that you know different ways to save more and how to earn money as a student, make sure that you integrate these money-making tips into your lifestyle.
Also read: Top 5 Online Cricket Gaming Apps Where You Can Make Money Legally