We all want to live a life with no fear and worry about our finances – ‘A life full of financial freedom’. However, that looks like an impossible task for many. Our Indian culture has taught us that our parents would be our emergency fund incase of crises and children would become retirement fund. Right?
I have seen many parents who’ve worked really hard throughout their lives and were once very strong financially. However, at their old and tender age, they turn out to be a dependent senior citizen with little to no savings or net worth. How’s that possible?
While we’re busy working hard and making money, we often fail to realize the importance of putting the money to work hard for us.
Why should we consider a retirement or emergency fund?
You Cannot Work Forever!
That’s the truth many people don’t want to hear. You are probably in your early 20s or 30s now. Getting a your dream job or a promotion and wondering why should we bother thinking about saving for emergency and retirement when we have good 20-30 years ahead to work.
However, as you age, you’re going to slow down and certain tasks will become more difficult. The more you progress in your life, you’ll only experience more expenses. We must accept the fact that our health and financial condition will never be the same. Saving is a habit that one needs to build and it will never happen when we postpone it for tomorrow. If you don’t plan to save & invest then does that mean you plan to work forever?
Your Future May Have More Financial Difficulty Than Your Past
We all face hardships in life, lets agree to this. However, people are often optimistic about their financial future, living with the faith that things will be better in the years to come. Personally, I really pray and hope that your future holds prosperity and abundance, whoever is reading this now. It is good to hope for the best but one must always be prepared for the worst.
I have many friends who have taken huge loans (like a home loan) and they only have single source of income which is through salary from job. Majority of their salary is paid for home loan that is for 20-25 years. I sometimes find it so difficult to understand how will they manage to save and what happens when they lose their job?
What if a recession hits in the next few days and the job or business that you do has a downfall? Will you be able to survive for next 6-8 months with no income from your primary source without asking any one for help?
No Security from Government
Unlike the US, UK or European countries where they have state-funded/sponsored pensions or social security benefits during retirement or unemployment. India so far does not have anything similar matching that. This means you are on your own when you are retired or unemployed.
It is highly unlikely that India will have something like this in near future. This may be a bad news for many however I take this as an opportunity to become self-dependent. It’s just the mindset that makes all the difference.
Powerful Advantage of Starting Early
Moreover, someone who starts early has a very high advantage to create more wealth than you can ever imagine. We can take a short example of two friends to save for their retirement. Rocky & Sunny who invests same amount i.e. Rs.1000 every month.
Rocky started investing at the age of 25 whereas Sunny started investing 5 years later i.e. at the age of 30. They both remained invested until the age of 60 and you can see the difference in return below.
As you can see, there is only a difference of 5 years however Rocky got almost double the returns. This is no trick or gimmick; this is power of compounding for you. The longer you wait, the more it will cost you. You can click here to understand the applied concept of the power of compounding in real life.
Gone are those days when the younger sibling could rely on elder brother for monetary support. The culture of the Indian families is changing as couples are going nuclear and staying separately. We are also having less children. Twenty-thirty years down the line there may not be many relatives to take care of you as a senior citizen. Think about it!
Children, when they grow up, want to relocate for jobs elsewhere. Also, the pressure to earn money and have a decent lifestyle would not give them enough time to allocate for parents and elders. Hence, it is important to plan your retirement without expecting any financial help from your immediate family.
There is a lot of mental satisfaction in having the ability to buy your own spectacles, medicines, provide food for yourself and also your spouse. Why should it change when you are 60? A retirement plan allows you to always keep your head high and live a retired life full of dignity and respect.
Lastly, you always have enough money to save & invest
Saving money is a challenge for some more than others, but it’s always much more of a mind game than a numbers game. As long as the end result of having a comfortable retirement is of high importance to you, you’ll find a way to save to make it happen.
I’m talking to future parents. My point here is to educate all of you about saving, investing and retirement planning. So there will be no more poor families, no poor retirees. 99% of Indians at age 65 are financially failing, I want my words to become part of the change that we all indirectly dream of – Financial Independence. However, the majority have no time for it, that makes me sad.
If you have no time to study investing and won’t allow yourself to educate about savings and investing, how would you expect your children to save for their own future? Hence, it’s my appeal to you to start creating a fund special fund as an emergency fund that will help you during crises situation. So you’ll not have to be dependent on your parents. Also start a special retirement fund because that day is not far.
Life is like a roller coaster ride, it has ups and downs. You have the choice to scream in fear or enjoy. If someone who have anticipated the ups and downs and have fastened the seat belt, they’ll be safe.