Money lessons: 5 personal finance learnings every Gen Z must know

Gen Z is transforming the investment landscape with a focus on financial autonomy and cutting-edge strategies. Setting clear financial goals and seeking advice from professionals can help navigate the investment journey with confidence. With Gen Z entering the investment realm at a younger age, they have a notable advantage. Beginning early enables them to harness the benefits of compounding, potentially building substantial wealth over time.

1. Save and Invest First, Spend Later

The golden rule of personal finance is to prioritize saving and investing before spending. Decide on a percentage, whether it’s 10%, 20%, or even 50%. that you can commit to saving. The higher, the better. This amount should be automatically set aside as soon as you earn, leaving the remaining for your expenses. This doesn’t mean you need to live like a miser. Strive for balance, but always ensure saving comes first. Even if it’s just 5%, starting small is better than not starting at all.

2. Beware of Lifestyle Inflation

As your income grows, it’s tempting to upgrade your lifestyle significantly, especially with the influence of social media and constant exposure to advertisements. Be mindful not to let your spending increase disproportionately. Instead, focus on maintaining a stable lifestyle and channeling your additional income into savings and investments. Avoid the trap of reducing your savings to fund unnecessary upgrades in your lifestyle. Always prioritize your financial goals over fleeting indulgences.

3. Master the Credit Card Game

Credit cards can be incredibly rewarding, offering cashbacks, perks, and rewards that are unmatched. However, they can also lead to a debt spiral if not used wisely. Treat your credit card as a cash replacement and only spend what you can pay off in full. Never use the full credit limit just because it’s available. Stick to expenses you would have made with cash, and always pay off your balance on time to avoid interest and penalties.

4. Be Smart About Education Loans

Pursuing higher education, especially abroad, is a significant financial commitment. Before taking on an education loan, assess the opportunities available post-graduation. Ensure there’s a realistic chance to cover your education costs through future earnings. While loans can be beneficial, a thorough cost-benefit analysis is essential. Weigh the potential returns of your education against the debt you’ll incur to avoid financial strain later.

5. Don’t Overlook Insurance and Emergency Funds

Insurance and emergency savings are the foundation of a secure financial future. Start by building an emergency fund of three to six months’ worth of expenses. Once that’s in place, prioritize getting health insurance. Without proper coverage, a medical emergency can wipe out your savings or push you into debt. Only after securing these essentials should you focus on investing. Think of it as building a strong safety net before climbing the ladder of investments.

The author is finance content creator and the author of book ‘The Money Guide’
 



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