Importance of Financial Planning

Financial planning is nothing but the understanding of one’s own future needs which includes House, vehicle, kids, kid’s education and many more. It is seen that the youth who save a decent percentage of their take-home compensation, rarely plan for the future and tax saving.

Well it is a well known fact that the “Youth is the beginning of responsibility”. Financial planning is one of the pre-requisites for a successful life. Moreover, financial planning early on is important as it helps the young generation plan their life in a better manner. Also, early investment gets the advantage of the “power of compounding” and helps the youth in compromising lesser, on the number of “good things in life”, so that they can lead a happy and balanced life. The Younger generation gets ample time to plan for their future and life after retirement but the problem is that only few people actually plan.

It is rightly said that “Money grows on the tree of patience” but only few people follow the formula and practice it. In power of compounding, the money is made to work for you year after year so that the individual earn interest on interest. The longer is the period of investment, the higher is the earning.

It is needless to say that every single person in this world would desire to have his or her future secured. In order to get that it is important that one start saving from a young age. Having access to some form of savings provides young people with the opportunity for a high quality education, health care, entrepreneurship, and other asset-building avenues. Warren Buffet who is known to be the most successful investor and one of the few richest persons in the world, started saving as early as when he was merely 12 years of age.

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Saving and Spending Patterns of Modern day Youth

It is a common tendency seen in young people that they desire to save only after they have higher-paying jobs or some stability in their lives. In developing countries like India, opportunities for structured and institutionalized saving are rare. This prevents the youth to postpone savings, as a result of which they pay later. It is seen that the youth of today makes excessive use of credit. Ease of availability of credit is good, provided it is used prudently. If used recklessly the same results in mountain of debt. Thus the use of credit comes down to judgment and prudence. It is seen that the formal financial training and schooling for young people imparts a sense of responsibility for their financial affairs and future financial success.

It is said the earlier one starts financial planning, the better it is to get the best from the power of compounding. It is very uncertain that this message of investing and planning financially earlier has been implemented by today’s youth. The youth of today has left the financial future of their lives at the hands of destiny and are definitely not prepared to withstand any uncertain life activities or pitfalls, which might occur to them any time.

It is very important for the people who are on the threshold of joining the large “maddening crowd” called educated and highly qualified workforce, to prepare themselves for the coming hour.

Noel Whittaker, one of the leading and noteworthy Financial Author and Investment Advisor rightly said:

“Becoming wealthy has nothing to do with your earning, or the stature of your parents or your property, it’s all about managing your money properly”.

In a research report it was reported that very few empirical studies have investigated the outcomes of youth savings in safe and secure bank accounts where investments were used to purchase an asset or held within an account for future use. The rising disposable income, increasing demand and the changing lifestyle are few reasons why the youth of today have diverse avenues to spend their money.

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Thus in a nutshell we can say that in today’s fast moving, competitive world the importance of financial planning needs to be understood by the youth. The earlier they start planning the better!