Compounding Gives Gen Z a 10-Year Head Start on Wealth

International Youth Day on August 12 put a spotlight on the financial habits of India's youngest working generation. The core message from two wealth managers: time, not a high income, is the biggest advantage people in their 20s have.

Siddharth Maurya, managing director at Vibhavangal Anukulkara Pvt Ltd, said early-career professionals typically carry fewer financial obligations. The investment amount at this stage does not have to be large to grow meaningfully over time. He illustrated with a compounding example. An investor who starts at age 25 with a ₹10,000 monthly SIP, increasing it by 10% each year, and stops at age 35, would have a corpus of ₹3.24 crore by age 60, assuming 12% annual returns. An investor who waits until 35 and starts with a higher SIP of ₹18,530 per month, continuing until 60, would only have ₹2.47 crore. The difference is the extra decade of compounding.

Akshay Rao, head of product and strategy at Tata Asset Management, echoed the message. People in their 20s have both time and fewer responsibilities, which lets them build financial independence with smaller monthly sums. He recommended that young savers first build an emergency fund covering six to 12 months of essential expenses, using low-risk options like savings accounts, fixed deposits or liquid mutual funds. After that, they should pare high-interest debt such as credit cards and education loans before starting SIPs in mutual funds aligned with their risk appetite.