Financial independence has been a point of interest in the last few years – from the development fields down to the individual level. It holds a different value to everyone across cultures.
Financial independence, in the USA for example, means freeing oneself of soul-crushing debt and/or retiring at an early age. When talking to the youth of our country, a few common definitions can be noticed. To most, it is the ability to afford what they want without having to worry about other better uses of the money.
The youth dream of financial independence not with survival or child-rearing in mind, but to lift the burden off their parents, or to not be dependent on them as an act of rebellion. No matter the reason, the drive to pursue that dream seems to be missing in most. These are some of the possible hindrances:
Lacking clarity of financial objectives
There is always a gap between dreamers and doers that the former have a hard time navigating. There is the age-old procrastination and lack of motivation stopping one from taking the first step. But attributing these to the personality as ‘inherent flaws’ is reductive. The lack of motivation comes mostly from looking at the seemingly unachievable peak from the base and the procrastination comes from not having a clear idea of how to get there.
Every discipline comes with career roadmaps that the student follows. Be it a job or a business, the long-term goals are based on the payroll. The subset of those goals – the financial objectives that need to be checked off – are not given thought. This chasing of milestones without stepping stones is what makes one feel directionless, thus prolonging the chase.
Financial literacy may be an overused buzzword, but a prerequisite for achieving these objectives. A fully fleshed-out plan whilst still a student is not needed or expected. But attending that one seminar on personal finance at university, or following that one GenZ-catered YouTube shorts channel on finance tips (think Finance With Sharan) makes the milestone a bit more achievable.
Not cultivating microsaving habits
Unless already interested in banking and investment, the youth finds it toilsome to put up with the paperwork that comes with opening savings accounts and depositing regularly at banks. There may not be schemes for students who have access to limited and arbitrary cash flow every month, from whichever mode of earning.
Microsaving, or saving in small amounts, can be a stepping stone for students to put a portion aside from pocket money and have the capital to sustain in the transition period to professional life after graduating. Popular Mobile Financial Service (MFS) apps are providing services for savings and microfinance from the comfort of one’s home.
FOMO – the modern lifestyle creep
The fear of missing out (FOMO) is a techno-dystopian instigator of the temptation to upgrade every small and large aspect of one’s life after accumulating a moderate amount of money. This temptation, known as the lifestyle creep, has been accentuated as of late by dint of flashy lifestyle influencers setting unrealistic standards.
A constant feed of every update on their eating and clothing habits and expensive hobbies makes the moderately earning student immediately switch to premium brands to get on the hype train. This urgency to upgrade lifestyle may provide instant gratification. And it may even be a positive confidence boost to indulge in such activities, spending hard-earned money instead of asking from parents.
But in the long run, it prolongs and perpetuates hardship. A gradual upgrade in lifestyle with a comparatively faster ascending income can help one retire a decade early and then indulge in these hobbies – the power of tiny gains.
Giving too much credit to one factor
It is undeniable that students will give in to lifestyle creep to keep up with the commodified shenanigans of their friend circle. Hence, despite there being a lot of avenues for students to gain financial independence now as well as in the future, they spend the earnings to fulfil the need right in front of them – FOMO.
Extensive educational campaigns on personal finance can create a habit of rationing and compartmentalising. But this effect is countered by the culture of putting one factor of financial independence on the pedestal – formal education.
The importance of formal education is embedded into our core from parenting and schooling even to the use of idioms. It is still arguably the safest mode for a secure future for students in a middle-income country like ours. However, this promise of a certain and secure life by means of studying day and night closes all windows of opportunity to accumulate enough wealth to retire early, not to mention its potentiality to backfire in a skill-based job sector.
This promise of certainty erases students’ wants for financial independence now, thereby giving them the assurance to spend recklessly. In many cases, the expectation and pressure of good grades shun the students from attempting to earn even this minuscule amount, depriving them of real-world experiences their potential employers would value.
Having to plan something as sensitive as the entire future while struggling as a student can be overwhelming. With the flourishing gig economy and traditional avenues of earning, students get a taste of adulting, of the freedom of choice.
Financial independence is a spectrum ranging from paying for treats and accessories to paying the bills of necessities and taking over one day. Utilised with even a minimum of clarity and guidance, the habits cultivated during this new phase can make the next one far easier.