6 Money Mistakes Of Indian Youth : Why Indian Youth Getting Poorer [2024]

To be in the top 1% of persons in India, you need to have a net worth of 1.45 crore rupees. But the fascinating part is that many people in India can’t reach this much in their whole life. According to a survey, 81% of Indian adolescents spend all their money before the end of the month. Some even waste all their money within 15 days and live on borrowed money for the balance of the month.

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Saving even a few thousand rupees is challenging, and reaching the top 1% feels unachievable. The cause for this is inadequate money management. Today’s middle-class youth are entangled in various challenges that make it tough to escape and become financially free. In this post, we will learn about the money mistakes made by the youthful generation and how to solve them to attain financial freedom.

Mistake No.1: Not Saving Enough

The biggest mistake young people make nowadays is taking time for granted. They imagine everything will happen later and focus on making their present good. In doing so, they spend 100% of their salary without thinking.

At first, it was okay, but soon they have so many bills that even after earning 35,000 each month, they have nothing left at the end of the month. They can’t satisfy their family’s necessities and wind up obtaining loans, which creates a significant problem for them.

If young individuals like Lokesh don’t save money in their 20s, they would have challenges with medical and education bills later on. This is a typical mistake. So focus more on saving to avoid ending up like Lokesh.

Mistake No.2: Investing Late

The second big error is neglecting investing and starting late. Today, individuals are quite smart and know about money. But there is an issue, and that is not investing quickly enough. Not investing can be a major loss for you. Let me explain with a tale.

Rahul and Sharan were two young males, 21 years old. After college, they both obtained work in good organizations and started earning 40,000 rupees per month. Rahul loves to spend money on nice items. When he earned his salary, he chose to buy the new iPhone in the market. Sharan encouraged him to start investing first and then spend money on other things. But Rahul assumed he could start investing in 4-5 years and bought the iPhone for 6,000 rupees per month on EMI.

On the other hand, Sharan saved some money from his paycheck and started a monthly SIP of 6,000 rupees in an index fund. In the beginning, he didn’t earn much return, but he continued to invest in the index fund. If you compare their wealth by age 35, Sharan will have 30,27,000 rupees because of his 12% yearly growth rate from investing for 15 years. Rahul, who selected the iPhone before investing, would only have roughly 13 to 14 lakh rupees by age 35.

So you can see that merely because of a 5-year delay, Sharan’s fortune became more than double Rahul’s wealth. This highlights how crucial it is to start investing early instead than buying on things like iPhones straight away.

Mistake No.3: Overuse of Credit Cards

In India, people have spent a lot of money using credit cards. Today, many people are obtaining loans not just for crises or buying houses, but also for small requirements. They utilize credit cards and enjoy life.

But there is an issue. In India, there is a lot of credit card debt that many cannot pay back. People utilize credit cards yet do not pay on time. This leads people slip into a dangerous trap of debt.

For example, let’s imagine a man named Sunny pays 10,000 rupees with his credit card. When the bill comes, he has to pay it by the 15th of next month. Sunny thinks he has ample time to save money and pay the amount. But he is late in saving and has to pay a late fee on the 10,000 rupees. He decides to pay the sum in monthly installments (EMI).

You might think 2,000 rupees is not much. But if you had put those 10,000 rupees in a fixed deposit (FD) for two years, they would become 12,000 rupees. So, it takes you far longer to earn that extra 2,000 rupees than you believe.

Also, when you don’t pay your credit card account on time, your credit score goes really terrible. This can make it hard for you to secure loans in the future. So be careful and clever with how you use your credit card.

Mistake No.4: No Emergency Funds

Mistake number four is not having an emergency fund. Emergencies can come anytime, like a medical crisis or losing a job. Many people in India dream of working for huge organizations because they have wonderful work, culture, and income packages. But after COVID-19, many lost their jobs and are still struggling since they didn’t have an emergency fund.

In India, 75% of the population doesn’t have an emergency fund. These are largely middle-class people who think it’s a waste of money. Emergency reserves are made for moments when unexpected problems happen, such losing money, a job, receiving a disability, or suffering a medical emergency. You should save at least six months’ worth of spending in your emergency fund. Today’s kids tend to spend on expensive phones and apparel, but it’s crucial to preserve money for emergencies.

Mistake No.5: Living Beyond Your Means

Our elders used to suggest that we should only stretch our legs as far as our blanket can cover. The problem today is that people are not making their blankets bigger but are still stretching their legs more and more. Nowadays, people are spending more than they earn, and often on goods they don’t truly need.

For example, the desire for luxury automobiles in India has increased so much that it’s like a celebration. People prefer to obtain loans to acquire these autos instead of buying a property. Sunita Singh, a 31-year-old woman, encountered this circumstance. She required a one-bedroom flat in Mumbai, but the loan she had to take was very huge and for 15 years. So, she opted to buy a car instead, with a smaller debt for only 5 years.

This is called the “placebo effect”. People acquire expensive stuff instead of what they genuinely need, only to show off in society. They don’t truly need these products but want to retain their reputation. This is why individuals spend over their means on products that lose value over time.

Mistake No.6: Get Rich Quick Schemes

Mistake number 6: Get rich quick schemes. You probably have heard this many times: “Double your money in 21 days.” Believe it or not, even today, many middle-class individuals, especially teenagers, have a lottery mentality. They aim to become rich as fast as possible without working hard. They invest in scams that promise to quadruple their money quickly.

But think about it: If every lamp had a genie that could make you rich quickly, then everyone would be affluent. Look at successful people and their tales. They know how to use their time and money properly. However, the middle class feels that all they need is a job and everything would be OK. Remember, Rome wasn’t built in a day. Just like that, building riches takes time and effort. So instead of being entangled in dangerous schemes, focus on investing sensibly.

Mistake Solutions for Indian Youth

First, apply the 50-30-20 guideline for spending and saving. This implies, spend 50% of your money on required items like rent, fees, medical bills, and dwelling expenses. Then, spend 30% on things you want, including food, entertainment, and outings. Save the remaining 20% for investments. This is crucial since when we are young, we often spend money on things we want and don’t save enough. So, adopt the 50-30-20 rule.

The second solution is to pay off debt strategically. Use auto-pay options for credit card and loan installments to prevent missing any payments. Make sure you have adequate money in your bank account before spending.
The final way is to use your money wisely by living below your means. Keep an emergency reserve that is conveniently available for unexpected events. This fund should cover at least six months of costs.
The fourth and most crucial solution is to invest in yourself. Don’t rely on people for your financial success; build an alternate revenue source. Read literature and concentrate on abilities that will aid you in the future. Stay interested and focused on developing yourself.

Conclusion

6 Money Mistakes of Indian Youth : Why Indian Youth Getting Poorer

In short, it’s up to you whether you make money mistakes in your youth or learn from them and take corrective action. Shape your financial future by adopting these solutions: follow the 50-30-20 rule, pay off debt strategically, live below your means with an emergency fund, and invest in yourself for a prosperous financial future.