While financial freedom excites every youngster when in your early 20’s, financial planning or wealth creation is generally found to be mundane at this age.

Rightfully so because your focus then is mostly on repayment of debts like educational loans, managing living expenses, discovering newfound city life, partying with friends, buying gifts for loved ones, latest gadgets and accessories, etc. The wish is to live life king-size with newfound financial independence.

Flashing of the plastic money shimmering in the wallet gives a different high to most at your age too. In the process, some of you tend to go overboard and spend beyond your actual income at times.

This is simply because living on a budget is not thrilling at all. Result? You land up making money mistakes and the consequences could be draining and long term. The wrong notion about financial freedom may lead you to this situation.

Financial freedom has different degrees to it; the most coveted one is when you have enough money to cover all your living expenses without you having to work for it anymore.

You are free to do what you feel like doing without worrying about earning money to meet your ends.

Naturally, other than those born with a silver spoon in their mouths and with large inheritances, most of us will mostly spend all our lives accumulating such kind of wealth, if at all.

However, the brighter side of the story is that you can still achieve a decent degree of financial freedom well ahead in life and feel liberated if you start saving and smart investing with small budget in your early 20s itself.

Yes, you do not need a huge income to have spare money to set aside for savings and investments aimed at wealth creation. Just start investing with little money as a habit every month to accumulate a decent fortune over a period of time.

How to Invest With Less Money or Within a Budget?:


1) Is it Possible to Invest with a Small Budget?:

This is possible because you have time on your side. Remember- ‘all investments are like little children; they grow better with time.’

Time has the power to help your money grow and compound itself to accumulate your much-desired corpus over periods of 7, 10, 15, 20, 30 years; in short, in the long run.

There are various investments for beginners that can help you build extraordinary wealth in future even if you start with disciplined small investment ideas in your early 20s.


But is it really important to Invest? I am so young!

Till about four to five years ago, young performers at the workplace could vouch for good job opportunities in the market and yearly salary increment as well.

However, over the past few years, the Indian economy is not doing well resulting in a crisis in the job market that has been made worse by the Covid-19 pandemic.

While youngsters are finding it difficult to get a suitable first opportunity for themselves, the youth in their 40s and above are losing their jobs and are being replaced by resources at a lesser cost.

To top it all, the past year and a half has been the havoc job loss in India contributed to by the ongoing pandemic. This has left the salaried class shaky in terms of career and income opportunities irrespective of their ages.

This makes financial planning and investments in your early 20s crucial to make sure your money works for you and help you tide over any unforeseen financial exigencies in life.

Just before beginning with the investment, ask yourself this 5 Questions for Personal Financial Planning

2) What should I do then? How to invest in 20s?:

There are options galore for investment for beginners. So start investing with small investment ideas/options having clarity of your financial goals. This will ensure your wealth accumulation simultaneously with an increase in your income.

However, before you do those, you need to put some checks and balances around few things –


Check #1:

Track your Credit Cards: Even before you prepare your monthly income vs. expenditure statement, you must take a look at the bunch of credit cards you use. Do you have an account on how much you spend on each one of them?

What are the payment cycles for your cards? Are your cards clear of their debts? Or have you fallen prey to revolving credit?

Are you aware that you pay interest rates as high as 40% on your cards in India?

No investment assures you that high returns ever. Thus paying off your credit card debts will ensure you have this valuable little money at hand to invest and make it work for you every month.


Mistake to avoid:

  • You do not need so many credit cards – it is just a feel-good thing. It is prudent to keep just one credit card for travel and the convenience of payment.
    • Ensure you set a reminder on your cell phone to clear your credit card dues on/ before time every month.
    • Auto debit mandates make payment of credit card and all other utility bills seamless and prevent any late fines/ interests.


Check #2:

Do I budget my expenses: While we agree that there is no thrill in living on a budget, we know that the benefits associated with making a budget outnumber an otherwise habit.

Thus make a list of your income and expenditures for a month. The difference will give you the amount of money saved. If your monthly “miscellaneous” expenses are as high as the sum of your loan repayments, rent and utility bills, groceries, medicines, etc., then you should definitely take a closer look at the former list to check for items you can live without to divert the amount into a fruitful investment for beginners.

Remember, if you are single with little financial responsibility at the moment, you should ideally follow a 50:30:20 rule.

Those who achieve financial freedom early in life have been seen to wrap up their complete living expenses within 50% of their monthly income.

You should ideally save/ invest at least 30% of the income and can look at spending the remaining 20% per your free will!


Mistake to avoid:

Most millennials have no concept of savings in their scheme of things. They spend their money on free will without a thought for tomorrow. By the middle of the month, their accounts run dry in many cases.

Credit cards and loans see them through the rest of the month. Hence they have no money to save/ invest for the future.


Check #3:

My Basic Needs: Smart investing with small budget is the key when on a budget. So if you are wondering how to invest in 20s, then you must first consider investing in a health insurance plan and a term life insurance plan before thinking about anything else.

This is because the younger and healthier you are, the cheaper these policies are in your pocket.

With age and deteriorating health, both these investments in insurance get expensive for the nature of the investment.

Going through the ongoing Covid-19 pandemic must have made it clear why having a health insurance cover is a must for both the young and old.

The unprecedented rise in health care costs makes health insurance a must-have irrespective of where you are in the country and even if you are covered to an extent by your current employer.

A 5 lakh cover will cost anything between INR 3000 and 7000 a year (comes to INR 8 to 19 per day) for a Gen-Z in their 20s (source policy bazaar.com).

You must also consider taking a life term cover of at least 22 times of your annual income in your twenties as permitted by IRDA to protect your loved ones from any financial burden in the face of uncertainties like death, disease and disabilities.


Mistake to avoid:

Millennials and Gen-Z have this notion that they are too young to get health insurance and/ or life insurance coverage on themselves.

They do not think about it till such time they either get married or are required to shoulder serious family responsibilities due to the untimely demise of an earning parent(s).

Thus it is strongly advised that if you feel responsible towards your parents and/ or planning a family shortly, book your Insurance Planning appointment with Koppr today!

This would save you and your loved ones from financial distress in the face of any exigencies.


Check #4:

My financial goals: Planning any investment for beginners requires an understanding of the financial goals of the investor. So what are your financial goals?

Most youngsters are seen to invest in an off the shelf retirement plan as their first investment without putting much thought into it.

Remember if you are on a budget and wondering how to start investing with very little money for you to choose the best investments for low budget; you will need to consider various parameters that will help you determine your financial goals and make a financial plan best suited for you.

These parameters can range from your –

  • Age,
  • Life stage – single or married, with/without a child,
  • Financial dreams you wish to achieve in life,
  • Timeline you have to see your dream come true,
  • Investment capacity and
  • Risk appetite, etc.

Mistake to avoid:

Not having the ‘big picture’ of your life defined is one of the biggest mistakes youngsters make in their 20s, simply because ‘you will have to see the ball to hit it’ towards your destination.

A clear roadmap of life goals helps to plan the finances judiciously, even if the budget is small to start with. Achieving any milestone takes a lot of effort and focus.

To help you plan your finances and your financial goals/ needs, learn about easy financial planning. For further query and support, we will be happy to help you.


Check #5:

Create Emergency Fund: If you are reading this article you are definitely lucky to have survived the ongoing landscape-scale global crisis created by the Covid-19 CoronaVirus.

Goes without saying you have realised how uncertain life is.

So is work and career. Thus to mitigate unforeseen financial exigencies arising out of medical contingencies, job loss, etc., an emergency fund will surely come to the rescue, especially if you have education and/ or other loans on you.

You should ideally have about 6 months of salary in your contingency fund. To build this fund you would just need to siphon off a part of your monthly salary through an auto-debit mandate into a separate account for a chosen period of a few years.

Recurring deposits and FDs too are often used to build emergency funds to tide over future financial exigencies.


Mistake to avoid:

Youngsters in their 20s are generally in denial of any emergency/ exigency that they may face. It is as if for the rest of the world, but not them.

As a result, they would choose to spend more money in wining and dining out or splurging on upgrading the latest gizmos.


So whenever you have a strong urge to update your gadget or give in to impulse buying, because it is a ‘cool thing to do/have’, we urge you to Stop. Step back. Think. Act. i.e. Stop before making the final decision.

Step back and think whether you actually need the thing. What is at stake if you don’t own it? Can this purchase be deferred? Then Act judiciously and with maturity.

Having said that, it is natural that a youngster like you will still get influenced by friends when you see them splurging and spending money and partying in the name of enjoying life.

But if your objective is to achieve financial freedom earliest in life, you will need to act differently.

That will help you lay the foundation for a brighter financial future compared to others in your batch. Remember you will still have at least 20% of your income to spend the way you want!

Read our 5 top reasons on Why you should start investing in yours 20’s.


Earning Rs 30,000 Monthly? Here’s How to Invest & Plan Your Money with Rs 30,000 Monthly



3) How to start investment with small amount?:


1) Choose Risk for Return

There are various options for investment for beginners. Given you are in your 20s, you have time on your side.

Time is the most important ingredient that can help your money multiply manifold if you choose to invest in equity or equity-related instruments. These instruments are known as ‘high risk – high return’ vehicles that are known to build wealth over time as they are capable of beating inflation, unlike most of the other debt instruments.

The best thing widely appreciated about Gen-Z and late millennials is your risk-taking capacity and your desire for continued learning and application.

Whether in making a career choice or otherwise, your risk appetite is generally much higher than in earlier generations. Moreover, you would be mostly single with lesser financial responsibilities, maybe just wedded without a child at the moment.

Thus investments in equity and related investment options would make an ideal choice for you.

These investments can comprise direct equity/ stock/ shares, equity mutual funds, ETFs (exchange-traded funds), SIP in stocks and mutual funds compared to low earning debt instruments.

SIPs (systematic investment plan) in equity mutual funds can be your first best bet.


Let us take a look at a scenario to check how allocating a budget on mutual funds can help you in your wealth creation.


Scenario #1:

Recurring Deposit vs. SIP Say, you invest INR 2500 in a Recurring Deposit in a bank for 10 years, earning you a 5.5% ongoing interest rate.

So total monthly investment would sum up to INR 3,00,000 in 10 years that will earn you a total interest of INR 1,00,048 at maturity. The total maturity amount would be INR 4, 00,048.


Refer to the table below.

RD vs. SIP Recurring Deposit SIP in Equity Mutual Fund
Instalment amount INR 2500 INR 2500
Term of investment 10 10
Term to maturity 10 10
Rate of interest/ Return 5.5% 10%
Total amount deposited INR 3,00,000 INR 3,00,000
Total interest/ return earned INR 1,00,048 INR 2,16,000
Maturity Amount INR 4,00,048 INR 5,16,000


On the other hand, if you invest the same amount of money for the same term to maturity in an equity-based mutual fund as an investment for beginners, your total yield would stand at INR 5,16,000 at maturity.

Return considered is at a modest 10% where on average the return varies between 10% – 12% compounded annually.

The good thing about any SIP is that irrespective of the market fluctuations, the law of average gets applied to your investments to get you above-average returns from the market.

This surely makes SIP a much better choice of investment for beginners.


2) Choose Long Term

Given the fact that you are in your early 20s, it is natural that your financial goals like children’s education, purchasing a second home or an expensive car, a luxury vacation and retirement are more than a decade(s) away.

In fact most of the times it is seen that the goals are not very clear among youngsters of your generation.

In this scenario, if you want to know how to start investing with very little money, we would strongly advise you to think long term as none of the aforesaid financial goals are likely to surface before 7 to 10 years and beyond.

The advantage in this is that your money will get enough time to work for you in generating wealth/ corpus to your satisfaction while you can pay attention to your career development, nurturing hobbies, among other things.

You just have to ensure that you never give up on your habit of saving and investing a budget on mutual funds. Yes, SIPs in mutual funds and ETFs are excellent ways to generate wealth for those with limited knowledge of stocks and other equity investments.

You have a diversified portfolio managed by dedicated fund managers that helps you minimise your risk even though you are exposed to equity-related investments; only because you have chosen to invest for the long term.

Refer to the table below.


Scenario #2:

Say you are 20 years old today. A SIP of INR 2500 in an Equity Mutual Fund for 7 years at the rate of a 10% return yields a return of INR 3, 05,000.

However a SIP for 10 years gets you a return of INR 5,16,000; and the same fund, if kept in the fund for 20 years without further feed, maturity amounts to INR 13,98,000, against an INR 3,00,000 investment.

And, say if you feed your same SIP for 20 years at the same rate, and leave it in the fund for 30 years from today, your corpus stands at a whopping INR 51,82,000 against an investment if INR 6,00,000 only. Such is the power of compounding!

Isn’t this magic unfolded!

SIP in Equity Mutual Fund SIP in Equity Mutual Fund SIP in Equity Mutual Fund SIP in Equity Mutual Fund
Age Age 25 years Age 30 years Age 40 years Age 50 years
Instalment amount INR 2500 INR 2500 2500 2500
Term of investment 7 10 10 20
Term to maturity 7 10 20 30
Rate of interest/ Return 10% 10% 10% 10%
Total amount deposited INR 2,10,000 INR 3,00,000 INR 3,00,000 INR 6,00,000
Total return earned INR 95,000 INR 2,16,000 INR 10,98,000 INR 45,82,000
Maturity Amount INR 3,05,000 INR 5,16,000 INR 13,98,000 INR 51,82,000


Best part of such investment for beginners and others in general is that it provides you with the liquidity to withdraw money against units as required without having to break your investment.

With investments in multiple SIPs, you are sure to get enough support to fulfil your goals or wealth creation for various long term financial goals in life. SIPs in ETFs to yield good returns.

And did I also tell you that you can start a SIP with only INR 500 a month! Isn’t that a great opportunity to start investing today!

As your income increases or you get incentives and annual performance bonuses, you can also start buying a few stocks of companies that are fundamentally strong; as they too are known to accumulate wealth over long periods of time to help you live your long term financial dreams.

Remember equity investments yield the best return in the long term.

However, you should not invest and forget about these investments. Rather you must keep a track of your investments and consult with your financial advisor from time to time to review your portfolio as the market fluctuates between high and low.

Sometimes you may need to reallocate your funds between stocks, funds and bonds to maintain and safe keep your returns.

You can learn more about financial planning and ways to monitor your investments download Koppr app on Playstore


Learn more about the power of compounding


3) Tax saved is money made:

In case you are a risk-averse person and/ or have some financial goals to achieve within 10 years, then there are various debt and equity-related instruments to invest your money in.

It is wise to choose instruments that will also help you save on your annual tax burden. A few of such investment for beginners is –

  • Bank fix deposits – it earns you an exemption amount invested U/S 80C if the term is 5 years.
  • Public Provident Fund – it can be maintained with a minimum annual investment of INR 500. It has maturity after 15 years but there is liquidity after 7 years. Principal invested is tax-efficient U/S 80C and gets you about 7.1% tax-free interest.
  • Equity Linked Savings Schemes (ELSS) – a tax-efficient mutual fund option with maturity in 10 years. It has a lock-in for 3 years as it is tax-efficient U/S 80C.
  • Debt mutual funds and bonds – they generally get you better returns than bank FDs and perform best when the equity market falters. This is because the debt and equity market are inversely related.


All these make it obvious that there is no foolproof method to wealth creation. However, in order to build wealth in the long run, you need to be disciplined and keep investing/ saving regularly, even if the amount is small to start with.

You also need to have basic knowledge of financial planning and financial instruments to enable smart investing with small budget on a regular basis once you have a solid action plan.

This knowledge will support you to consult with your financial advisors and engage in knowledgeable discussions around your investments so that over a period of time you will be in a position to manage and monitor your investments independently. No need to get any formal degree in financial planning for that.

However, to enhance your knowledge of financial planning, you can just spend some time on the Koppr app and do a quick online course on Relationships and Finances to kick start your journey towards building wealth right from your 20s.

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