Play hard, party harder. This is the mantra that the younger generation seems to live by. Call centres, coffee chains, retailing malls etc. have made it possible for today’s youth to earn money that simply wasn’t possible in the past. Which is a good thing. However, once the money is earned, what happens to it is another story altogether.

The savings rate in our economy is around 28%, which is one of the highest in the world. But, we can be almost sure that a large part of these savings are those cultivated by our nation’s silver or senior citizens.

Failing to plan is like planning to fail. The sooner our Generation X realises this truth, the better it will be for them. Yes, liberalization of our economy has resulted in opportunities today that are almost infinite, as compared to say twenty years ago or before that. Like mentioned before, today’s youngsters start earning a healthy sum pretty early in life. Responsibilities are limited and the attitude seems to be “live for today — don’t worry about tomorrow”. After all, the latest version of the mobile phone has to be owned, the clothes have to have a designer label, the shoes have to be from the latest fashion line released worldwide, the perfume…… the list is endless and no matter how much you earn, it isn’t going to be enough.

But those from today’s Gen X who are actually reading this article — here is a sobering thought. Lets say one requires around Rs. 30,000 per month to live a reasonably comfortable lifestyle. The inflation rate is around 8%. Say you retire 30 years from now. How much would you require per month at that time to maintain the same standard of living?

The answer is a spine chilling Rs. 3,02,000!!!

And remember, at that time, you have retired. So the regular monthly income is no longer coming in. Which means this amount has to be earned from your investments. Say for arguments sake, your investments earn 10%. (This rate is too high, but is used just as an example). At 10%, to earn Rs. 3,02,000 per month you need a capital of around Rs 3 crore 62 lakhs!!!

Now, the money is not going to come by itself — only if you start now, you have a chance of making it. Now, the next question is how?

Building a nest-egg

You have to make the most of your situation. For its soon going to change. Today, you are young, but don’t have family responsibilities. All that you earn is for your own self. The best thing you can do is investing it properly.

Remember there is a difference between capital and wealth. Wealth is when your capital brings a smile to your face! And merely investing a portion of your salary in Bank FDs is not going to build you wealth. Historically it has been proven that equity investments has outperformed any other asset class. However, it comes with associated risks. The key is that your situation in life allows you to undertake that risk!! Grab this opportunity with both hands.

Diversified equity funds

Our advice is don’t dabble in the stock market on your own. Also, never, never, listen to anyone’s tips. That’s a sure fire way of losing money. Instead, allow professionals to do the hard work for you. This you can do by investing in diversified equity mutual funds of a quality pedigree. These are extremely flexible instruments that offer the optimum mix of return, risk, liquidity and tax-efficiency.

Not for a moment are we suggesting that you invest all your money in these instruments. However, every month, earmark a certain portion — say 10% to 25% of your monthly income for investment purposes. These instruments also allow you to invest as little as Rs. 1000. Then for those who require a disciplined approach, there is the Systematic Investment Plan (SIP). You can give post dated cheques for six or twelve months and the investment would be automatically done on your behalf. There are several other benefits to an SIP, but space constrains don’t allow a detailed discussion.

Fixed income

The other side of the coin is fixed income investments. As the Gen X grows older, there arise responsibilities. Marrige, children, buying a house, medical expenses etc. etc. It follows that the ability to take risk gets diluted as one grows older. This is the time when gradually, one has to reduce one’s exposure to equity and invest more in fixed income bearing safer instruments.

The investment avenues

This brings us to the next segment of the article — the instruments on offer which alongwith the youngsters, silver citizens should also use to optimize their investible funds.

Income schemes of MFs are one option. These too can be used to start an SIP. Bank FDs is another option but the tax rate brings the yield down. Some other avenues are as follow.

GOI savings bonds

The tax-free flavour has been discontinued as it was too popular, especially with the high income group. The 8% taxable version pays interest half-yearly yielding an IRR of 8.16 per cent.  If you have additional funds, apart from the abovementioned, PPF (discussed briefly hereunder) also makes a good investment.


PPF continues to be an evergreen investment. The tax-free interest, with the capital assurance and the tax rebate makes it almost too good to be true. Don’t worry too much about the term of 15 years, from the seventh year on, an investor can withdraw 50% of the balance to his credit four years back. So certain amount of liquidity is in-built in the scheme.

The planning mindset

They say the time to mend the roof is when the sun is shining.

As far as your work life is concerned, look outside, perhaps, it is shining at its brightest. In other words, it doesn’t matter whether you are in your teens or twenties or even your thirties sometime or the other, your productive years are going to come to an end and the regular stream of income that you get either out of your employment or out of your business is going to decline. When such a time comes, you have to ensure that the standard of living that you and your family are used to is maintained. And if one plans well, the standard of living can even improve! Therefore, it is never too soon and never too late to plan for the future.

The author may be contacted at

A N Shanbhag

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