You’ve just bagged a placement with a dream company after slogging it out at your degree or post-grad for the last 4 or 5 years. You’ve received a good offer and have joined work. For the first time in your life, you have money of your own to spend just as you like. Without anyone’s permission.  

When you’re wallowing in the joy of this newfound financial freedom, any talk of saving or investing is bound to be a dampener. Why should you, at the beginning of a long career where you’ll make a ton of money, save or invest?  

While you do not need to save or invest a lot at this stage, you do need to make a start. There are four good reasons to save 10-15 per cent of your salary and invest it.  

To save tax  

As you receive your first few pay checks you suddenly realise that your salary is not wholly your own. You need to part with 10 per cent,20 per cent or 30 per cent towards income tax. One of the main reasons why young folks start to think about investing is to save some of their income from the clutches of the taxman. If you’re earning about ₹7 lakh a year, you’d have to shell out ₹52,500 as tax in the old tax regime. If you invest ₹1.5 lakh in the PPF, you can cut that tax bill by more than half to ₹22,500.     

For big-ticket goals  

All of us have some dreams that look out of reach with our current paycheck. The dreams needn’t be big ones like buying a Merc or a 3BHK. They could be small ones about a new Oneplus, a family bash at the Taj or a vacation in Greece. If you want to fulfil such dreams (financial folks call these financial goals), saving and investing come in handy. Putting away 5k a month in a Recurring Deposit earning 8 per cent for just 3 years can get you to ₹2.04 lakh. Investing about ₹5k a month for 5 years in an equity fund that earns 10 per cent can fetch you nearly ₹4 lakh.  

Investing towards future goals also inculcates the habit of delayed gratification, which is great for your financial health. When you borrow to meet your goals, you end up with the burden of EMIs that take away the joy of earning and tie you to your job.   

To deal with emergencies  

Emergencies can happen to anyone. They may be small ones, like having your computer or phone conk off suddenly making you buy a new one. Or they can be serious ones like suffering an accident or having your parents fall sick requiring hospitalisation. When emergencies crop up, you may not have much choice about how you raise quick money. Many folks end up scrounging for money from their friends or colleagues that may ruin relationships.  

Saving up some money every month and putting it away in liquid instruments like fixed deposits with your bank, can help you tide over emergencies without the added stress of raising quick money.  

To make your money earn more money  

Most wealthy folks do not have to work for a living because they can live off their passive income. Passive income is the interest, dividends etc. that flow to you every year from the investments you’ve made. A cushion of passive income can help you manage your expenses when you take a career break, are between jobs or are pursuing higher studies. To get passive income, you need to save and invest so that your money can earn more money, even if you’re not working!  

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