The 20s is the age when you start earning money and it is the best stage of your life when you need to start saving and investing for a stress-free life post-retirement. You have a lot of opportunities and options to invest, and a long tenure of investment. Not only do you generate money for your future but also save taxes by investing in tax exemption schemes. Money grows with time and thus starts investing today and enjoys a lump-sum amount in your golden days. The return rates increase with tenure and you can start investing with Rs. 500 per month.

Plan for your retirement at an early stage. Get a retirement calculator to estimate the amount you will be needing post-retirement. This tool plans your retirement by asking you several questions –

• What is your age?

• How much do you spend monthly?

• How do you want to spend your life after retirement?

• Where are you saving for your retirement?

• How much amount will you be requiring for retirement?

• How much do you need to save per month?

At a young age if you make a perfect retirement plan and continue saving money accordingly then life will not be harder for you after retirement. You can invest in stocks and bonds at an early age. Stocks are associated with high risk but over a long period, it generates higher returns. You can also invest in some other equity investments like real estate, gold, or real estate investment trusts. Bonds are the funds from where companies and even the government borrows money for developing a project. They pay interest on the amount and this becomes your income source. After maturity, you can withdraw the amount. Investing in bonds is a long term investment plan.

Tips to start investing in your 20s

To make aggressive investments in the 20s you need to have a strategy.

1. Build an emergency fund – Before you start investing, build an emergency fund so that you can withdraw money from that fund at times of emergency, without touching your Investments.

2. Set investment goals – At the age of 20 you can have short term goals like travelling, marriage plans, etc and long term goals including post-retirement. You can house your money depending on your needs.  Create separate accounts for immediate needs like bill payments or rents, midterm plans like travel plans or marriage, mid to long term plans includes a child’s education and long term plans include retirement. Housing your accounts separately will keep you organized.

3. Research thoroughly – Make a thorough research on the best investments to make in your 20s and especially go through all the terms and conditions including the exclusions and inclusions. You can take help from an expert friend of yours for better understanding than to suffer at your retirement age. Check if there are some hidden charges or not.

4. Avoid making emotional decisions and invest according to your plans and needs – While taking financial decisions don’t panic and take the wrong step. Instead, study the market properly, try to clear up your knowledge and then take decisions. You need to trust yourself by gathering knowledge on the investment plan.

5. Contribute to a retirement account with the employer or invest in an IRA – most of the public and private sector organizations provide money that you need to save for your retirement. A percentage of your salary is contributed to the account and part of the contribution is also made by the employer. This investment grows with time and you can withdraw the money at the time of retirement. Most importantly this is a tax-free saving.

If the organization does not provide the above benefits then you can open an IRA and make regular contributions. There are two IRA options – one is traditional and the other is Roth. If you invest at the 20s then you need to pay fewer taxes than your retirement age.

Invest in a mutual fund at an early stage and you can access the power of compounding. In this stage of life, you are having fewer responsibilities and therefore can save most of your amount. Investment options for young adults are –

• Post office savings

• Public Provident Fund

• Liquid Funds

• Recurring Deposits

• Systematic Investment Plans

• Debt Funds

• Life insurance

Common mistakes that the youngsters perform are –

• Unable to manage all the expenses, that includes savings, investments, repayments, and other daily living expenses. Failure in proper budgeting creates a lot of mishaps.

• Saving does not mean you need to deprive yourself. Most of the youngsters indulge in saving money while not caring for themselves.

• Stacking debts is another problem among young adults these days. Try to clear all your debts at an early stage so that the amount does not increase and create a burden in old age.

• Not trying to increase income. As a young adult, you must have plenty of energy to work more so that the income increases. With a rise in income, you can save more.

• Don’t be a YES person. Most young adults these days love paying bills for friends, keep lending money to others, and are taken advantage of. You must learn to handle money at an early stage of your career.

Being in the 20s is the best time to stop spending all your salaries uselessly and start saving as well as investing for old age. Look for the best investment plans, read them carefully, check the holding periods of different fund categories, learn about the risks associated with the funds, and then start investing.