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How your pocket money can make you a crorepati

If you are in high school or college, there’s a possibility you get at least a few thousand rupees as pocket money. But, did you know that if you save even a part of this pocket money, you can become a crorepati? That’s because you need to have two things to become super rich, namely time and money

If you are in high school or college, there’s a possibility you get at least a few thousand rupees as pocket money. But, did you know that if you save even a part of this pocket money, you can become a crorepati? That’s because you need to have two things to become super rich, namely time and money

Time

 Even though your pocket money might be a small amount, time is on your side. You have the advantage of having loads of time. You can use the magic of compounding. Simply put compounding means, when you make an investment you earn an interest, in compounding you earn interest on the interest too. This magnifies the return you can earn. If one lets the magic work a long, long time, as in case of a young person who can remain invested for a long time, one can generate immense wealth over the years. 

When it comes to becoming a crorepati, one does not need loads of money right away. Even a small amount invested systematically over a long period will work wonders.

Money

When it comes to becoming a crorepati, one does not need loads of money right away. Even a small amount invested systematically over a long period will work wonders. A Systematic Investment Plan or SIP in an equity mutual fund can start with as low as Rs 500 a month. Equity funds are mutual fund schemes that invest predominantly in equities. Such funds invest at least 65% of the scheme's assets in equities and equity related instruments, giving your money a power to beat inflation and generate higher returns over a long term or more than 7 years. 

Let’s see with an example:  Say you are 18 years old and get Rs 4,000 as pocket money a month. You use creative ways to cut your expenses and save some money and invest in a Equity Mutual fund. Expectation of annual return on investment is 12%. You set this small SIP automatically via your bank account till the age of 60.  For e.g. if one invests Rs 2000 a month: at the end of the tenure one will have Rs 5.47 Cr. By investing Rs. 1000 a month, at the end of the SIP tenure, one can expect to receive Rs 2.73 Cr. Even a small amount of Rs. 500 per month can turn to a whopping Rs 1.36 Cr over the said duration. 

The fact remains, that generally one does not remain unpaid for their entire life and eventually starts earning their own income and does not depend on parents for pocket money. If one keeps increasing the SIP amount every year from their own income, becoming a crorepati earlier is much more possible.  So, while you do the usual things (fun and otherwise) that are normal for your age, don’t forget to start something “unusual” like an SIP. Who knows, it might get you something cool someday. Like a Crore.

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