At 22, when Anoop Sharma started working as a marketing executive for a courier company, he had dreams more expensive than his salary. High-end mobile, bike and expensive clothing; he wanted all of it on the day he got his first salary of Rs 12,000.
And despite his parents' repeated advice to save, within two years, Sharma ended up owing Rs 20,000 to his friends and another Rs 30,000 on his credit card.
"I had to take a personal loan to square-off my credit card loan as my father refused to help," says Anoop. He does regret not saving but feels sorry that he cannot yet share the financial burden of his father, who retired this March.
It was a dilemma for his father Vinod Sharma who wanted to see his son financially independent before he retired. "Nothing worked. He ignored the repeated pleas to save or contribute to the family expenses. Not that we really needed his contribution, but we just wanted him to develop the right habits," laments Sharma, who is still sceptical of his son's money management skills.
Sharma's is not an isolated case. Increasingly, youngsters are finding themselves in a debt trap early in their careers. And it is peer pressure or simply, inability to manage the new-found financial freedom.
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Though the Indian middle class has become much better-off financially and many may not need contributions from children to run their families, there is a growing fear that the children are moving too fast and too soon.
"These children are spending in a rather reckless fashion to fulfil the desire of owning expensive mobile, and laptops," says Vishram Modak, a certified financial planner.
And it's rather difficult to explain the benefits of savings to them because they are seeing their peers doing the same. The 'instalment culture' is rather addictive. "Often, elders end up pulling them out of the financial mess," says Modak.
MANAGING EXPENSES AND PARENTS' EMOTIONS
Many youngsters usually ignore fulfilling parents' expectations as the family is well-off. "They fail to realise the mental satisfaction parents gain with gestures as small as paying off electricity or telephone bills," said Kartik Jhaveri, director, Transcend India.
Baljit Kaur, a conservation assistant with a museum earns Rs 20,000, shrugs off when asked why doesn't she save: "At least, I do not borrow even though I don't contribute to household expenses regularly," she argues.
PARENTAL CARE
Parents' intervention always helps to make them financially savvy. For instance, Amitabh Mishra's father asked him to give his entire salary at home in the initial two years. He gave his son restricted money for daily expenses while he was working as an auto sales representative.
And for any expensive purchase, he would accompany his children. "He questioned whenever I asked for extra money. But he never denied if I wanted to buy anything expensive. It helped to manage my expenses well," accepts a candid Mishra.
Yaduvansh Tiwari, father of IT professional Yogesh Tiwari, encouraged his son to work during his studies to teach him money management. While pursuing his engineering, Yogesh repaired and assembled computers.
"Though he never said no for money, he made sure I manage my expenses through my part-time work," said Yogesh.
At 23, today he earns Rs 35,000 from his job and the part-time computer business and proudly says that his father does not have spend a penny from his pension.
THE ROADMAP
Of course, it may not be possible for every youngster to go through the similar rigours to save money. "Someone starting to earn for the first time will like to manage his own money and learn through his mistakes," says Hitungshu Debnath, director, wealth management services, Angel Broking.
To avoid messing up, follow a simple method. When starting your career, make a rule to save minimum of 10 per cent of the total salary. After six months keep increasing the proportion of savings. "Ideally it should be 25 per cent," says Jhaveri.
Debnath suggest that one can start saving with provident fund as it is tax-free. Insurance is also a good option for investing as the premiums are low. Of course, mutual fund investments through systematic investment plans are a must to meet long-term financial goals.
However, if you end up having a loan, keep it to as little as 15 per cent of the salary. First, pay off the credit card loan, then personal loans and auto loans, in that order. A portion of the money should be essentially used to show your parents you care.
One can start with smaller responsibilities such as taking charge of paying either electricity or phone bills regularly. If parents have retired, you can invest in senior citizen savings scheme and buy an adequate health insurance.
Yes, you should enjoy the new-found freedom. Now that you have taken care of the finances, splurge, but just a little.