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Tips to ensure financial security

Are you financially equipped to deal with an emergency? No, don't smile. In fact, most young Indians aren't fit enough to deal with such emergencies. According to a global study conducted by Visa, 41% of young respondents (in the age-group of 18-24 years) are not financially equipped to deal with emergencies.

This is a key indicator of their level of preparedness as building a contingency kitty is fundamental to any financial plan. "The (Global Financial Literacy) Barometer clearly demonstrates that more needs to be done in advancing financial education in India especially among women and young people," says Uttam Nayak, group country manager, India and South Asia, Visa.

If you have just kick-started your career, pay heed to these tips to ensure a financially secure future:

Create an emergency corpus

The Visa survey has found that the average savings earmarked for an emergency by Indians was capable of lasting just 1.9 months. Financial planners, on the other hand, recommend keeping aside a sum worth six months' expenses in a fixed deposit or a liquid fund. With the latest tax structure exempting savings bank interest up to Rs 10,000 from tax, you have another choice in your basket. "Now there is a case for parking this amount in the savings bank account instead," says Prerana Salaskar-Apte, certified financial planner, The Tipping Point.

Protect yourself

Once contingency fund is taken care of, you can focus on insurance. Buy a life cover only if your family is dependent on your income. Even in that case, stick to term insurance. If you do not have such responsibilities, a health cover will suffice.

To enhance your protection portfolio, add a personal accident (PA) cover, budget permitting. While the health policy will prevent erosion in savings due to hospitalisation, PA cover will make good any loss of income if you are unable to work in the interim.

Plan to achieve goals

Next step should be devising goal-oriented investment strategy - be it for house purchase, marriage, arranging for children's education or retirement planning. "For goals with a short-term horizon of around three years, like buying a house, you can look at debt mutual funds," says Pankaj Mathpal, CFP and CEO, Optima Money Managers. For longer-term goals like children's education or building a retirement nest, equity mutual funds would be the best bet, say financial planners.

Now, the final piece of advice, which is perhaps the toughest to follow - avoid using credit cards recklessly. Remember, they are meant to be spending, and not borrowing, tools and you would do well to treat them so.

source:  http://economictimes.indiatimes.com/personal-finance/savings-centre/analysis/just-kick-started-your-career-tips-to-ensure-financial-security/articleshow/14177557.cms

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