It is an overwhelming experience when a fresher like you, just out of college receives the taste of financial freedom with your first pay packet. It is way more than the stipend or pocket money you were getting till a few days ago.

The feel is like you have the whole world in your hands and you no longer have to ask for pocket money from your parents or elders at home! In fact, your heart wants to spend the money – your own money in buying gifts and goodies for your home and loved ones with pride.

And yes, now the latest fashion in clothes, accessories, and gizmos seem to be must-haves and most of you would love to splurge on them and more.

This is but natural a tendency with all youngsters and is well deserved too.

I am sure you will also agree that while having a great time splurging money wherever and whenever you feel like is a great feeling of freedom and happiness, there are likely to be financial commitments that you would need to and should make at the same time.

This is because in a few years, by the time you are 30 years old, your life and life stages are likely to have changed. This would come with undeniable financial responsibilities of parent(s) and/or wife and child or both.

Suddenly you may feel financially burdened and stressed thinking about how you are expected to meet the expectation for all. Trust me this is a common problem with most youngsters – who feel that you have a ‘lot of time’ and things to do before you can think of saving or investing in your 20s.

Looking at responsibilities through the ‘rear mirror’ of your car is an unwise thing to do. They are actually closer than you think.

What every Indian in their 20s should know about their money?:


So what should I do?

Investment for beginners is a thing to learn and how to manage your money in your 20s is a skill to acquire, if you want to grow wealth in the long run, live a financially healthy life and fulfil all your dreams.

We have a specialized course on financial planning, (PS This is not just like any other course!)

This article will give you an overview and tips on –

  • how to manage money in your 20s
  • where to invest for beginners
  • investing in your 20s
  • making money in your 20s


1) When should I start to save/ invest my money?:

So what is the magic mantra for investment for beginners? It is quite simple you see.

Just Start early. Stay invested. Get better returns. No rocket science at all.

Yes, you must start early, even perhaps start from your first pay-check itself. You can start with small investment amounts of even Rs 500 a month/ year (depending on the nature of the investment tool you are considering) and later on increase the amount as your pay packet gets fatter.

This is because when you start investing in your 20s, even with very small amounts, it will still leave you with a much wider investment horizon. The longer the period for which you remain invested in a plan/ investment tool, the better will be your chance to diversify your investment between risk and income/ debt instruments to maximise wealth creation in the long run.

For example, when you are in your early 20s, your retirement is aeons away. However, if you start putting aside money in a reliable instrument, it will accrue a fortune for your golden years which otherwise will get stunted even if you delay it for say, 5 years.

One thing you much get clear at the onset. Saving money in a bank is not the same as investing money.

Saving money is more like hoarding money at a minimal interest rate like in a savings account that will not beat inflation. On the other hand exposure to equity and equity-related investments are capable of beating inflation and thus support wealth creation in the long run.

For example, say you are saving Rs 100 in a bank for an average interest rate of 2.75% to 3.5% in the bank savings account but retail inflation stands at 5.52% today. This means what you can buy at Rs 100 today, will cost you Rs. 105 tomorrow. But your bank will give you only Rs 103 approximately. Hence your money will be losing in its value lying only in the bank.

On the other hand, an investment in equity over a time horizon of 10 years and more is likely to get you about 10% compounded annually (and more) and thus beating inflation, leading to wealth creation.
Here are top 5 reasons why you should start investing in your 20s

2) What are your basic needs?:

If you are wondering how to manage money in your 20s; you must first make a checklist of your basic yet mandatory monthly expenditures. This is because a chunk of your money will go into that whether you like it or not.

They can include an EMI for your education loan that you need to set off.  If your city of work is away from your hometown, then you will have rent, conveyance, utilities, groceries, medicines and insurance at least, to account for.

This is likely to eat into approx. 50% of your salary. Let us take a closer look into these items and how you can optimise your expenses.

1) Education loan

Loans on your shoulders are never a good thing to have. So along with the EMIs, whenever you make an extra income as an incentive or bonus, you must use it to set off your loan to clear it off at the earliest.

Same for your credit card loans. Always try and pay off the credit card dues in full to avoid getting into the vicious cycle of interest accrued on the outstanding amount.

That will increase your disposable income to a large extent to consider discretionary expenses of your choice.


2) Rent

The largest chunk of your salary at hand is likely to go into rent and all associated utilities, monthly groceries, and medicines.

If you see that your hands are getting tight because of high rent, you may look at moving to a different locality where rent will be relatively less.

You can also look at sharing an apartment with someone else if you do not have frequent visitors from home. That will help to lessen the financial burden on you.


3) Health Insurance

Whether you are single or married, the investment for beginners must commence with a health insurance coverage of at least Rs. 5 lakhs if you are in a Tier I city. In case your parents are not covered as of date, then consider a family floater with the same amount of coverage to start with.
If you are married with children, then the family floater should be Rs. 10 lakhs.

Later on when your income increase further, you must look at adding top-ups for critical illnesses and hereditary illnesses if any to ensure maximum protection to yourself and your family in the face of any unforeseen medical exigencies.

I am sure you are aware of holes in people’s pockets that the rising costs of medical expenses create if these expenses are not planned well.

If you are looking to buy unbiased and best health insurance plans, feel free to reach out to us!

4) Term life insurance

It is prudent to buy a term life insurance cover of at least 22 times your annual salary (as estimated and approved in the regulatory guidelines of IRDA).

This will ensure your financial liabilities (if any) will be taken care of at a minimal cost in case life poses any uncertainty in the form of death, disease or disability. Any financial burden on the family will be prevented.

Yes, if you are 25 years old and want to buy Rs. 50 lakhs term insurance cover, it will cost you anything between approx. Rs. 5000 and Rs. 6000 a year (source online applications).

This comes to just about Rs. 16 a day which is perhaps a throw-away price for buying  ‘peace of mind’! Isn’t that a great bargain for what’s at stake?


3) Where to invest for beginners?:

Of the remaining 50% of the salary, you should aim at investing at least 30%. Remember all your investments should be well thought of and be based on various financial goals of your life. You are likely to have short term, medium-term and long term goals.
However if you do not have an education loan to repay and/ or are based out of your hometown for work, then you must aim to invest about 50% of our salary at hand. This will ensure your money is working for you to make you wealthy!

1) Long term goals:

These goals have an investment horizon of 10 years and above. They may include planning for retirement, children’s education, investment in real estate, a family vacation in a foreign country, wealth creation, etc.
The best investment for beginners in India is SIPs (Systematic Investment Plan) in equity and equity-based schemes. When you invest in these kinds of SIPs with a long term horizon of over 10 to 15 years and beyond, then you safely earn a return of over 10% compounded annually. It has been observed that a monthly SIP of Rs 3000 over 35 years can earn you a whopping 12% return and build a capital of Rs. 1.9 crores.

With the increase in your paycheques, you must look at increasing your contribution in SIPs. Not just equity and equity-related schemes; SIPs are available in debt-related and a combination of debt and equity schemes as well.

SIPs in Equity Linked Savings Schemes (ELSS) have a dual advantage of returns and tax benefits U/S 80C on your investments in the scheme as well. All ELSS have a lock-in period of 3 years for the tax benefits it offers.

So depending upon your goal and risk appetite you should be able to consciously choose schemes to help in making money in your 20s.
However, largely popular investment for beginners in India for long term investments have been Employee Provident Fund (EPF) and Public Provident Fund (PPF) schemes.

These two schemes will reap you the best interest rates among all known small savings schemes in the country. While EPF is a set of mandatory monthly deductions and contributions made by your employer from your salary, PPF is a voluntary account opened by individuals with various State Bank branches of India.

The best part about investments in PPF is that –


  • You can open and maintain the account with just Rs. 500 a year.
  • With the increase in your income, you can increase your contributions year on year.
  • The maximum you can contribute to your PPF account is RS. 150000 per year.
  • The lock-in period on the PPF scheme is 7 years; partial withdrawals are allowed post that.
  • All withdrawals from your PPF account are tax-free.
  • Your annual contribution into your PPF account is eligible for tax relief U/S 80C too.


2) Short / Medium-term goals:

To meet your short term and medium-term goals, there are an array of debt instruments like fixed deposits, bonds, debt/ income fund, liquid funds, etc. where you can invest your money.

In case you are a person who wants to play it safe and would want to secure a steady flow of money for yourself, you may want to invest your money in a debt instrument that would generate a monthly income for you for the chosen term.

Then Post Office Monthly Income Scheme (POMIS) is the right instrument for you.

You can invest a total of Rs. 4.5 lakhs in your POMIS account that will yield you a guaranteed interest of 6.6%.  Later on in life, you may invest another Rs. 4.5 lakhs in your wife’s name as well if you want.

The best part of this investment option is that there is no tax deducted at source on the monthly disbursements!


3) Build an Emergency Fund:

We, the lucky survivors of the Covid-19 pandemic can vouch about the fact that life is very uncertain. So is work. There is no guarantee in anything.

Thus siphoning of money into a new/ separate account to build an emergency fund would make a wise choice for all youngsters like you to seamlessly tide over the times of financial crisis that may arise in future.

To achieve this goal, you can choose from various tools like fixed deposits, recurring deposits, or even a separate savings account.

Learn all about Mutual Funds for FREE and get know know why it one of the best investment options

4) Any money left to spend for fun and on free will?:

Yes of course! You have managed your money so well that you still have 20% of your at hand salary to spend it the way you want to! You can spend this money on buying clothes, accessories, gadgets, eating out, gifts for your loved ones, weekend trips to nearby destinations, donations, etc. Isn’t that wonderful?

Just keep in mind that these discretionary expenses should not ideally overshoot 20% of your salary at hand. In case it does, try and trim it mindfully with a smile without hurting your own emotions or others.
However, if you do not have any loan on yourself and your workplace is in your hometown itself, then surely you may at times take the liberty to spend even 25% of your monthly at hand salary. And trust me it is okay to do that.

Shopping and spending time with friends after all are great stress busters!


Avoid these money mistakes if your objective is making money in your 20s

While there are many mistakes in life that are forgiven and forgotten too, mistakes around money matters are hard to cope with and recover from. This is because it is your hard-earned money.

Thus you need to be careful not to fall into matters of money in your days of young adulthood as you might take a lot of time to bounce back but the scar will remain.

Find latest banking and finance news including stock news insurance news, personal finance and more only on Koppr App. Download Now!

5) Here are the 5 common money mistakes to avoid in your 20s

1) Monthly expenses not budgeted:

Managing your money first time all by yourself in your 20s will be exciting but can prove to be a challenging affair as well. If your calculation goes wrong, remember you won’t have pocket money to fall back on.

Thus the 50:30:20 rule discussed here can be handy. It is wise to start with a detailed list of mandatory expenditures for the month to allocate/ reallocate money as required.

2) Rising Debts:

While it may look great to flash a bunch of credit cards in your wallet when you are young, it is strongly advised to keep just one credit card for your use as required.

That is because it is simply impossible to remember all transactions made on different credit cards and keep a track of multiple payment cycles.

Thus people, mostly youngsters like you fall into a trap of revolving credit with very high interest rates that can be as high as 40%. Keeping debts on loans and credit cards has never done well for anyone.

It will 

  • not only get you into a vicious cycle of revolving credit,
  • eat into your disposable income paying EMIs with high-interest rates,
  • also adversely affect your credit score which will require you to run from pillar to post to set it right when you need it
  • Take away your night’s sleep and make you stressed.


Thus make it a habit to settle your credit card bill in full, on or before the due date. A monthly reminder on your smartphone will help do the needful for you.

For other EMIs on loans, SIPs, etc. and monthly payment of phone bills among others, auto-debit mandates with your bank will save you from all late payments with extra charges.


Here is our comprehensive guide on Debt Management – How to Manage Your Debts Effectively


3) Saying ‘No’ to more income opportunities:

You are young and vibrant filled with energy and passion in your 20s.

That ensures making money in your 20s more viable with so many opportunities around. Other than your regular 9 to 5 job, you can make that extra money by investing prudently inequity and dividend-yielding schemes, as a freelancer in your specialised area(s), helping start-ups, giving tuitions, among other things.

These will not only keep you fruitfully engaged but boost your confidence and add to your disposable income as well. So don’t be complacent, go for more!


4) Shutting out personal needs/ wants:

Never play Uncle Scrooge on yourself and try to save every paisa. That will not help.

That is not the reason or objective of planning and making investments. When you see your friends and peers enjoying their life, it will only lead you to depression, stress and make you unhappy.

Remember it is good to spend money and treat yourself and your loved ones once in a while. It builds your morale, keeps you happy and motivated too. However, if you need to splurge on something really expensive compared to your pocket –

Stop. Step back and Think whether you REALLY need it NOW or it can wait for a LATER DATE. That will save you from regrets later on.


5) Do not be the soft target:

Are you the kind who can’t say no to friends when they ask you to settle bills during getting together? All the time? Every time? Beware of leeches/ parasites.

This is a very common feature in young people in their 20s. It is a great virtue to be warm, generous and kind-hearted, but it is also important to understand if you are being taken advantage of by your own people in your social circle.

Over a period of time, it is bound to make you feel bad instead of improving your mood. If that is the case, though it is a hard choice to make, you must look at making changes with whom you hang around.

This is the right thing to do in the absence of fairness and compassion within the group. There is no place of guilt in this action of yours as it is not good to feel financially lost because of some unworthy people. 

Though this article detailed options of investment for beginners and how to manage money in your 20s, it is your willingness and foresightedness that will ensure how efficiently and effectively you manage your money to ensure that you live and gift your loved ones financially happy, healthy and stress-free life.

Stay updated with latest financial news and start planning your finances with FREE with our AI powered Koppr App

Take care of your Finances with Koppr