Rohit, a young graduate from DU, joined an MNC as Marketing Executive. The salary was not high, but enough to indulge and splurge on occasional outings, eating out at fancy places, and movies with friends. He believed life is to be lived in the present, and it is too early for savings and investments, so much so that he viewed PF deductions from salary as a burden.
Like many young earners, there is nothing wrong with Rohit who is enjoying his newfound financial independence. He deserves to spend his money the way he wants. However, the life is long and there is need to realize that it is never too early for savings and investments. Starting early in a balanced manner can significantly add up to the future corpus and manifold improve long-term financial well-being. The genesis of start early approach stems from the interest rate mathematics that we learn at schools, demonstrating the power of compounding. If we start investments early, we need to save much lesser to reach our goals. If Rohit starts saving a small sum of Rs 2500 every month at the age of 23, he can reach a target of whopping 1.04 crores rupees at a 10% interest rate at the age of 60. However, if he delays it by 7 years and starts investments at 30 the corpus becomes about half to about 52 lakhs. Thus, a saving of Rs 2500 per month over initial 7 years can add more than 50 lakhs to the corpus.
The table below exhibits how a monthly investment of Rs. 2500 can grow at 10% rate of return:
| Start Age | Retirement Corpus at 60 |
| 23 | ₹ 1.04 Crore |
| 30 | ₹ 52 Lakhs |
| 35 | ₹ 31 Lakhs |
Starting early by investing the same amount at the age of 23 years results in more than double the corpus compared to starting at the age of 30, and more than 3 times compared to starting at 35 years. Many young professionals delay investments citing different reasons, but understanding the facts can help build a secure financial future. Here’s a reality check on some prevalent myths:
| Myth | Fact |
| I am too young to save | Early start will bring discipline and more time for money to grow |
| My earnings are not enough | Small amounts by skipping a coffee or movie , can give you money and help you to make a beginning |
| Retirement is decades away | If you delay, you lose out the benefit of power of compounding |
| I want to enjoy my life | A balanced approach can bring financial security enabling you to enjoy today and tomorrow. |
Instead of completely sacrificing enjoyment, one can adopt smarter financial habits. Having a budget or leaving a fixed amount every month for investments can be a great way to start. Setting up systematic transfers to a recurring deposit or mutual fund can ensure consistency in saving and reduce the temptation to spend unnecessarily. Savings and investments does not mean giving up on enjoyment, rather it means making sensible choices. Rohit, by making small adjustments can accumulate large corpus for his future. With rise in longevity of life, health needs, inflation and other risks, it is always better to build a large corpus. Remember – small sacrifices today can lead to big financial freedom tomorrow.