Money Mistakes That First-Jobbers Should Avoid

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The most common mistakes that young, first-jobbers make with their money is that they fail to save and, hence, invest. Money9’s Kartik Malhotra spoke to Rati Shetty, Chief Product Officer, Bank Bazaar. Here are is an excerpt.

Kartik: What are the most common money mistakes that first jobbers make as they start drawing a regular income?

Rati Shetty: It’s exciting for first jobbers to see their salary being credited and the tendency is to splurge on buying everything on their wish list with their newly found financial independence. Failing to save is a mistake. It’s also important to start investing early on. First jobbers put off saving for retirement and neglect building an emergency fund as retirement and financial contingencies don’t appear to be a top priority at that point in their lives. They may also neglect budgeting. Robust money management from the very first pay cheque is a great start to anyone’s financial journey.

 When and for what kinds of transactions should credit cards be used as a rule?

Credit Cards can be used when shopping online or at an offline store as long as the merchant or retailer is trusted – this will minimise the risk of the card being misused. It’s important to know the billing cycle of your card so you can maximise the benefit of the interest-free period. For instance, if you transact on your card immediately after the bill is generated, you could enjoy as much as 45 interest-free days. Of course, the golden rule is to always pay your bill on time and in full and utilise up to 30% of your credit limit so that your credit score remains excellent.

Is the old notion of investing in a home as your top priority changing among the youth?

The ongoing COVID-19 crisis has altered financial priorities significantly. BankBazaar’s Aspiration Index 2020 found that for the first time, people are deprioritising traditional top goals like buying a house, even if they are financially prepared. They don’t want to take undue risks at a time of heightened uncertainties and securing their financial future has taken precedence.

 India has seen a record number of new demat accounts last year. What does this trend show about changing investor behaviour?

Investors are looking beyond traditional savings instruments such as fixed deposits and savings bank accounts, which took a hit as interest rates tumbled. Lockdowns prompted retail investors, who were confined at home, to do in-depth research and start investing for better returns. COVID-19 forced an industry-wide shift to online. An abundance of investment platforms with access to direct mutual funds, gold, stock trading, IPOs, ETFs, pension schemes combined with policy changes to ease KYC norms, better internet penetration, and easier access to abundant information online have attracted more people into the investment ecosystem and made it easy for them to start investing.

Investments in land and gold demat accounts grew. As virtual became the norm, investing in technology seemed like a safe bet so there’s been a surge in investments in firms focused on video streaming, gaming, healthcare-related tech, e-commerce platforms and cloud-based life-science management providers.