Lack of financial and investment literacy among new earners usually leaves them clueless regarding short-term and long-term wealth creation. As a result, they tend to splurge on unnecessary items and lifestyle upgrades.

However, once this initial euphoria comes to a halt, you must think about the efficient ways to put your monthly earnings to wealth creation. Discussed here are two crucial tips on savings and investing to create a stable financial base.

  • Design a financial plan

A financial plan is a process of forming a strategy to manage your money to attain your financial goals depending on your cash flows, risk tolerance level, and investment time frame. A financial plan gives a clear direction to your investment, ensures periodic investments, and assists in inculcating financial discipline.

After you have zeroed in on your financial goals, compute the corpus required for every goal, the presumed return rate, the time left for attaining them, and the rate of inflation. Once you have estimated the corpus required, you can take the help of an online calculator to compute the monthly contribution you must make to attain those goals on time.

For meeting your long-term goals, opt for equity mutual funds. This is because equity as an asset class has the potential to generate returns that beat inflation and fixed-income returns by a wide margin over the long term. However, in the case of short-term goals, you must ensure to invest in a savings account, fixed deposit, or recurring deposit. This is because such instruments provide capital protection, satisfactory returns, and high liquidity features.

  • Create an emergency fund

New earners must save sufficient funds to face financial emergencies that may arise owing to job loss, illness, disabilities, and other unforeseen life events. Without an adequate financial backup, you would be propelled to redeem investments for meeting your monthly expenses or avail loans at a higher rate of interest to meet financial emergencies. This may negatively impact your long-term wealth-building objectives for a substantial time.

As a young earner, it’s important to build an adequate emergency fund to meet all unavoidable monthly expenditures like utility bills, daily living expenses, SIPs and EMIs, rent, and insurance premiums, for a period of six to 12 months in case there is no income coming in.

As financial emergencies can hit at any time, these funds must be kept in a savings bank account owing to their instant liquidity features. You must ensure to maintain a separate savings account as an emergency fund. Note that before hitting on the online savings account opening option, you must ensure to compare different types of savings accounts and opt for the account that matches your preferences and needs well. To compare savings accounts, factor in parameters like minimum average balance requirement, savings account interest rate offered, ATM facility, etc. Note that the documents required for a bank account are identity proof (driving license, voter’s ID, passport, or Aadhaar card), signature proof (PAN card, passport, or driving license), address proof (bank statement, Aadhaar card, voter’s ID, passport, driving license, utility bill, or bank account statement) and latest passport size photos. Ensure to keep these documents handy for a hassle-free account opening process.


As a young earner, you must focus on creating a financial plan to meet all your financial goals by the deadline. However, before you begin your investment towards your goals, ensure to create an adequate emergency fund. Doing so would prevent you from dipping into your investments in times of financial crunches. Make sure to build your emergency fund in a savings bank account as it offers capital preservation and high liquidity.

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