What is the best thing to do with a first salary?
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What is the best thing to do with a first salary?

  • Highlights

  • Start an FD account for a safe investment

  • Invest in mutual funds for high returns

  • Buy medical and life insurance early in life

  • Keep aside a contingency fund for emergencies

Getting your first job is an exhilarating experience and the first salary even more so. However, in today’s world where necessities such as a house and a car come with a high price tag, and retirement costs are ever increasing, saving early on is important. Here’s how you should invest your first salary.

Multiply earnings by learning about compounding

The biggest dilemma for new investors is where to invest the excess income. Start slowly by investing in safe yet simple investments such as fixed deposits. They are simple to maintain and provide quick liquidity in case of urgent needs. Search for a lender who offers the highest interest rate and the best security for your savings.
Just like a plant grows into a tree over time, your money, if invested will grow by leaps and bounds.

For example, you invest Rs.25, 000 in an FD for 1 year at an interest of 7.6%, you will get Rs.1900 as interest. If you invest for 2 years instead, your interest will be Rs.4052, instead of Rs.3800 (Rs.1900 + Rs.1900). The extra amount of Rs.252 is because your interest earnings of Rs.1900 from the first year was re-invested and added to the corpus of Rs.25,000 in the second year. This is how compounding will help to grow your investment over time.

Start investing in mutual funds

Start a mutual fund investment as they will give you high returns of about 12.5%. Alternatively, you can also start a SIP (Systematic Investment Plan) which invests into mutual funds. SIPs are reporting 3-year earnings of up to 25% so you stand to grow your wealth over time. You are required to invest in the SIP at regular intervals ranging from weekly to quarterly. This is a great way to start saving every month.

Buy life and health insurance

Before you start investing for your future, you need to protect yourself from medical emergencies and the costs that follow. Choose a medical insurance plan that will cover you in case of an emergency. Also, invest in a long-term life insurance policy. Typically, life insurance policies come with built-in investments. Take advantage of this additional saving.

Reasons to invest in Fixed Deposits | Bajaj Finance

Start an emergency fund

You never know what life has in store be it in terms of healthcare, loss of a job or helping out a family member. Emergencies come unannounced and so it always pays to be prepared. Keep aside a contingency fund which can cover your expenses for 3-6 months so you can meet such situations comfortably.

You never know what life has in store be it in terms of healthcare, loss of a job or helping out a family member. Emergencies come unannounced and so it always pays to be prepared. Keep aside a contingency fund which can cover your expenses for 3-6 months so you can meet such situations comfortably.

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