International Youth Day: Fewer responsibilities, longer time — how Gen Z can harness their 20s for wealth creation

International Youth Day, celebrated on 12 August, recognises the vital role of young people in society. Financial planning is another important area for young people, as the habits they build early can shape their long-term financial future.

Here’s what experts have to say about why the 20s can be an ideal time to start building wealth and the steps Gen Z can take this International Youth Day.

Why do your 20s matter for wealth creation?

Siddharth Maurya, Managing Director, Vibhavangal Anukulkara Pvt Ltd, said the biggest advantage for people in their 20s is not a high income but time.

“Most early-career professionals have fewer financial obligations, so the investment amount at this stage doesn’t have to be very high for the investment to grow,” Maurya added.

Akshay Rao, Head – Product and Strategy, Tata Asset Management, also noted that “people in their 20s have an advantage when building financial independence, as they have both time and, in many cases, fewer financial responsibilities.”

How can delaying investments impact wealth creation?

“Investing early allows you to have a larger amount at the end, but the cost of waiting to invest can also be large,” Maurya said.

He illustrated this with an example showing the impact of an additional 10 years of compounding.

• Starting a SIP of ₹10,000 a month at 25 at an assumed 12% return could result in around ₹1.76 crore by age 50.
• Starting the same investment at 35 could result in roughly ₹69 lakh by age 50.

The difference is because the first investor’s money gets 10 additional years to grow.

Why should SIPs increase as income rises?

Maurya recommended SIP step-ups to increase investments as earnings grow. A ₹10,000 monthly SIP could become ₹11,000 the next year and ₹12,100 the year after with a 10% annual increase.

Rao said those seeking financial independence should increase savings and investments as income rises rather than allowing higher earnings to be entirely absorbed by lifestyle upgrades. He added that the broader journey can involve building a corpus of around 25 times annual expenses over time.

Why should young investors build financial foundations first?

Maurya said Gen Z should focus on developing an investing habit while controlling lifestyle inflation. As a broad guide, he suggested:

• 50-60% of investable money towards long-term growth assets such as equity mutual funds.
• 20-30% towards stable debt or fixed-income funds.
• The remaining amount towards short-term needs and liquidity.
• The allocation should change as financial and life goals evolve.

Rao noted that young investors can begin by building an emergency fund covering 6-12 months of essential expenses through relatively low-risk avenues such as savings accounts, fixed deposits or liquid mutual funds.

“At the same time, they should prioritise repayment of high-interest debt such as credit cards and education loans. Once this foundation is in place, starting SIPs in mutual funds, aligned with their risk appetite, can help develop consistency,” Rao added.

Why should Gen Z not confuse investing with trading?

Maurya cautioned against chasing stocks, crypto and other high-risk investments promoted on social media. Such behaviour can turn long-term investing into speculation.

“Instead, young investors should build a diversified portfolio, let equity markets work over the long term and avoid trying to time the market,” he added.

“For long-term goals, investors may consider equity mutual funds and stay invested instead of attempting to time the market,” says Rao.

What should Gen Z do this International Youth Day?

Maurya said Gen Z should focus on the following:

• Start investing even without a high salary; a small SIP can be the first step.
• Increase the SIP by at least 10% with every salary increase.
• Think long term instead of trying to time the market.
• Avoid risky investments until an emergency fund is built.
• Saving 15-20% on payments towards expensive, high-interest loans can be more valuable than chasing investment returns.
• Use long-term goals to decide how finances should be divided.
• Have adequate health insurance.