How do I allocate my monthly savings to different goals?

Is there any thumb rule to know what proportion of monthly savings should be allocated to different goals like retirement, child education, buying a house, etc.?
- Bharat

No, there is no thumb rule on how much you should save and there can't be a thumb rule because it entirely depends on your goals and other factors, such as how young your child is; when he is likely to go for his higher education; what kind of education he goes for and how expensive it will be, which one doesn't know. Also, if your goal is to buy a house, then some factors like what kind of house you are planning to buy and whether you are planning to buy it in five years or seven years or more (negotiable based on your circumstances) play a major role. And all these factors ultimately determine how much you need to save and these factors are different from person to person. Hence, at the root level, there can't be a thumb rule that fits all.

The basic thumb rule is to save and invest as much as you can in equity. The money that you are unlikely to need in the next 10 years should be invested in equity. Being invested for one-two cycles in the market will give you enough confidence and help you plan things more finely as you get closer to your goals.

This article was originally published on August 26, 2020.