In India’s fast-growing economy, where the cost of living continues to rise and the financial markets display new complexities, starting financial planning in your 20s is not just beneficial; it’s essential. Young adults stepping into their careers often find themselves navigating a world filled with opportunities and risks. Here’s how early financial planning can give you an idea of how it can be approached.

1. Building an adequate emergency fund
One of the first steps in financial planning is establishing an emergency fund. Life is unpredictable, and unexpected expenses such as medical emergencies, job losses, or urgent home repairs can derail your finances if you’re not prepared. Ideally, your emergency fund should cover three to six months of living expenses. This fund acts as a financial buffer, reducing the need to rely on high-interest loans or credit cards during crises.

2. Understand the Power of Compounding
Investing early can be tremendously beneficial due to the power of compounding, where your investment earnings generate their own earnings. For example, if you start investing ₹5,000 monthly at an average return of 4% annually, by the time you reach 60, your modest monthly savings could grow to over ₹5,824,324. Starting in your 20s gives your investments more time to grow, leveraging the maximum potential of compounding.

3. Managing Debt Efficiently
Many young Indians start their careers with education loans. Effective financial planning helps manage and pay off these debts strategically without letting them accumulate. By prioritising high-interest debts and making consistent repayments, you can maintain a healthy credit score, which is crucial for future financial undertakings like applying for a home loan or financing a business.
We suggest you don’t take any loans apart from student loans at the starting stage of your career. If you are going for a job and you want to pursue higher education, in that case, you can apply only for a student loan. Apart from that, don’t fall into any kind of luxury until you have your base covered.

4. Setting Long-Term Goals
Your 20s are the perfect time to set long-term financial goals. Whether it’s buying a home, saving for a child’s education, or planning for retirement, early planning gives you a clearer timeline and more room to manoeuvre your finances accordingly. It also helps inculcate discipline and financial literacy, essential traits for managing money effectively.

5. Achieving financial freedom
Lastly, starting early in financial planning empowers you with financial freedom. This means having the financial capability to make life choices without being overly stressed about money. It could involve changing careers, starting a business, or taking a sabbatical to travel or study further.

In conclusion, beginning your financial planning journey in your 20s sets the foundation for a financially secure future. And also, at the same time, in the 20s, you can take calculated risks in life and enjoy life to the fullest. Because this will be the age where you can explore life, try new things, fail miserably, and get up again. And yeah, at the same time, remember, the best time to start planning your finances was yesterday; the next best time is today.