Personal Finance For Millenials


In my last article, General Tips for Millennials, I gave an intro of the sought of life that we should live as millennials regarding how we manage our finances. This is only a follow-up on that and would stress the importance of investment and saving for the future.

Earlier emphasized, investment is one of the best ways to secure your future. No matter how much you earn, make provision to invest and grow your finances. Even if you are on a monthly allowance, you can still invest. Most of us see depositing our money in the bank as investment. Well fine but it isn’t. I like you to do a quick calculation here, kindly compare how much interest the bank pays you per month on your deposit to how much they charge you as either SMS alert or ATM maintenance fee or cheque book charge or ATM withdrawal charges. It is obvious that the charges are higher than the so-called interest. So, you see bank deposit isn’t an investment but technically an expense you run.

So then how do you ensure that in saving your money, it also grows instead of depleting. This is also in consonance with the time value of money which says that one naira today isn’t one naira tomorrow. It should grow in value. That will happen if it is invested. otherwise, say you kept your savings in a box like we used to in the days past, inflation will deplete the value of your money over time. Inflation is the persistent increase in the price of goods and services. The value of money is measured by its purchasing power and what inflation does is to reduce the purchasing power of money. In simple term, you can no longer buy a liter of fuel for N87. You could invest your money in real project or in financial securities.

Investment in real project include buying land and reselling it in the future at a higher price. I will like to delve into investing in financial securities or instruments. You can invest in equity or any fixed income instrument such as mutual fund, bonds or treasury bills. Equity (share or stock) is a unit of a company and if you own a company’s share means you are a part owner of that company and is entitled to dividend when the company declares profit or you earn money through capital appreciation by selling off your shares at a price higher than your purchase price. But then this isn’t a lecture. All I can say is that the risk on equity is quite high likewise the expected return this is called the Risk-Return Tradeoff. Only people with high risk appetite should invest in equity.

As a young person, fixed income instrument such as money market mutual fund is your best shot. All you need do is deposit your money with the asset management company such as ARM Investment or AXA Mansard, they will trade with your money and pay you a quarterly interest of between 14% and 17%. This is a low risk investment as you stand to lose little or nothing.

You could also invest in bonds. A bond is a debt instrument used by Government to borrow money from the public. If you invest in Nigerian Government Bond means you borrowed government money for a quarterly interest. Once again this is a low risk investment as you will always make gains. In recent times, the Nigerian Government has intensified effort to encourage its citizens to invest in its bonds. It started with the Federal Government Savings Bond which was issued earlier this year where you could invest in government bonds for as low as five thousand naira for a quarterly interest of 14%. The current bond you can invest in is the Nigerian Government first infrastructure bond called Federal Government Sukuk.

You are not too young to plan your old age. If you can’t save now that you earn ten thousand naira with little or no responsibility, you obviously won’t be able to save when your income increases to ten million naira as you would have so much responsibilities coming from even the sky, the younger the better, open a Retirement Savings Account (RSA) and set aside any amount that you can to protect your future. Everyone is encouraged to do this.

All these present opportunities for you to grow your finances and protect your future. If after all these you still prefer to save your money at the bank, set aside some money to deposit in a non-debit account so you will not be able to withdraw money from it.

If you need assistance with any of what’s in this writeup or you just need more information, feel free to buzz me up.

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