Financial planning for the Youth


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Financial Planning for Youth
A simple, easy to understand guide for youngsters to learn how to manage their money and create wealth.
This presentation sheds light on the factors that are critical to a healthy financial management over one's lifetime. It will further take you through the fundamentals of planning - be it investment planning, risk management, tax and contingency planning or planning for your retirement.

Published in: Economy & Finance, Business

Financial planning for the Youth

  1. 1. Financial Planning for the Youth
  2. 2. What does today’s youth want?
  3. 3. Easy Availability of Credit Funds the Aspiration
  4. 4. Which Leads to….Huge Burdenof DebtShortage of money forfinancing the criticalgoalsNo surplus to invest,leading to uncertainfuture
  5. 5. Perils of excessive debt• Regular outflow to fund EMIs prevents accumulation of savings• High interest cost if existing debt is high• Opportunity Cost – not being able to invest when opportunityarises• Additional stress• Effect on long term goals (retirement, child’s education/marriage)
  6. 6. Ensures your present action is aligned with future goals
  7. 7. What is Financial Planning?Financial Planning is a processMaking, executing and monitoring financial decisions that enable you to achieveyour financial goalsFinancial Planning InvolvesRisk Management – risk of dying early, living too long or critical illnessInvestment PlanningAsset AcquisitionEstate Planning
  8. 8. Financial Planning Process
  9. 9. Life StagesYoung Adult Family FormationFamily FormationFamily DevelopmentRetirement
  10. 10. Life-Cycle Phases Financial Planning AreasYoung adult (18–25) Consumption and savings; careerFamily formation (26–35) Consumption and savings; career; debt; insurance;income taxesFamily development (36–49) Investment; retirement; income taxesFamily maturity (50–60) Investment; retirement; estateRetirement (60–?) Estate; income taxesLife Cycle Financial Planning
  11. 11. 25 30 43 50 55 60 65 70 80 90 100AGEMarriage /childrenChildren – growingneeds/educationGrowingneeds/marriage•Your earning grow till60•Save max till 60•Have max resp.till 60Now it’s yourown needsWould notlike to bedependent onanybodyEarnings have gowndownResponsibility CurveLIABILITIESNeedsIncome
  12. 12. Objectives of Financial Planning• Risk Management– Life– Health– Liability Management• Investment Planning– Wealth Creation– Asset Acquisition– Planning for Events(Child’s Marriage/Education, Retirement)• Contingency Planning• Tax Planning• Retirement Planning
  13. 13. Keys to an effective financial planning…. Start Early – Benefit from the power of compounding02000004000006000008000001000000120000030323436384042444648505254565860AgeFundValueRs. 10,000 invested from age 30 to age 40yearsTotal Amount saved Rs. 100,000Maturity Value Rs. 9.8 LacsRs. 10,000 invested from age 40 to age 60 yearsTotal Amount saved Rs. 200,000Maturity Value Rs. 5.5 LacsCost of DelayDifference = Rs.4.3 Lacs
  14. 14. Keys to an effective financial planning…. Allocate funds to assets based on the following factors• Risk Tolerance– Stage in life (young adult, nearing retirement etc.)– Net Worth (Asset liability balance)– Investment Experience (novice, knowledgeable)• Time Horizon– Short term goals– Long term goals• Investment Objective– Retirement– Wealth Creation– Capital Preservation– Income Generation
  15. 15. RiskReturnSavingsAccountLiquid FundsKVP, NSC POGoldEquityDebt FundsReal EstateKeys to effective financial planning….Risk Return characteristics of asset classes
  16. 16. Keys to effective financial planning….Year 1 2 3 4 5 6 7 8 9 10 11 12NAV 10 9.5 8.5 8 7.6 7 6.5 7.4 8.2 9.3 9.5 9.9One time Lump sump Investment in fundSystematic Investment PlanInvestment made on 10 Jan – Rs. 120,000/-Fund Value on 12thYear – Rs. 118,800/-Regular Annual Investment – Rs. 10,000/-(as shown in graph)Fund Value on 12thYear – Rs. 143,261/-SIP SafeguardsFrom VolatilityYearSIP Works MagicEarns Significant ReturnsEven if Market is not encouraging678910111 2 3 4 5 6 7 8 9 10 11 12Rs 10,000/-Rs 10,000/-Rs 10,000/-Rs 10,000/-Rs 1,0000/-Rs 10,000/-Rs 10,000/-Rs 10,000/-Rs 10,000/-Rs 10,000/-Rs 10,000/-Rs 10,000/-For an Investment = 120,000/- in an volatile marketInvest in a systematic and a disciplined manner
  17. 17. Keys to effective financial planning….UnemploymentDisabilityAccidentContingencyContingencyPlanningPlanningCritical IllnessKeep reserves for a rainy day
  18. 18. Thank You