Personal Financial Strategies for Young People Preparing for Old Age

When youth determines the quality of old age

"Every day you delay preparing financially for old age, you're stealing 10 years of happiness from your future self." This might sound extreme, but when I calculated the actual numbers, I had to admit it's absolutely accurate.

Last week, at a personal finance workshop, I met Minh - a 28-year-old programmer earning 25 million VND per month. He asked me: "Violet, do I really need to worry about retirement money right now? I'm still young, retirement is 40 years away." I opened my laptop and showed him a simple calculation: if he started saving 2 million VND per month from now, the principal alone after 40 years would be 960 million VND. But if he delayed for 7 years before starting, he would only accumulate 792 million VND in the remaining 33 years - 168 million VND less just from procrastination!

As I analyzed in my articles about the impact of population aging and opportunities from the silver economy, preparing financially for old age is no longer "nice to have" but has become "must have" for our generation. Today, let's build a practical and achievable personal financial strategy together.

Alarming Reality: Young People Aren't Ready for Old Age

Concerning Numbers from Real Surveys

According to the latest Nielsen Vietnam research, 73% of young people aged 22-35 have no financial plan for old age. Among those who have started saving, 68% rely only on bank deposits with 4-6% annual interest - insufficient to combat 3-4% annual inflation.

Particularly worrying, 82% of young people believe the current social insurance system will be enough for them to live comfortably in old age. In reality, current social insurance pension levels only equal 45-55% of final salary, while financial experts recommend at least 70-80% to maintain quality of life.

Did you know? Only 15% of young Vietnamese participate in personal financial investment programs, and less than 5% contribute to voluntary pension funds. This figure is much lower than Singapore (65%) or Malaysia (40%).

Why Aren't Young People Preparing?

"Too early" mentality: Most young people think 40-50 years is too long to worry about. They prioritize current spending needs like buying houses, cars, getting married, raising children.

Lack of financial knowledge: Vietnam's education system doesn't include personal financial management courses. As a result, many people don't understand compound interest, inflation, or how investment products work.

Low income and high spending pressure: With average salaries of 12-18 million VND, after deducting basic expenses, many young people feel they don't have enough money for long-term savings.

Family dependence: The culture of "children supporting parents" makes many young people believe their children will care for them when old, without needing independent financial preparation.

Digital Tools Supporting Young Generation

Popular financial management apps:

• Momo/ZaloPay: 78% of young people aged 22-30 use for basic expense tracking
• Money Lover: Vietnamese app with 2 million users, helps with detailed budgeting
• Finhay: Mass investment platform allowing investments from 100,000 VND
• Tiki Smart Invest: Integrating shopping and investment, attracting many beginners

According to Mr. Le Minh Tam, Financial Expert from SSI Research: "Vietnamese Gen Z and Millennials tend to use technology for financial management, but still lack knowledge about long-term investment. The important thing is that financial education must go hand in hand with digital tools."

Golden Principles: The 4% Rule and Global Lessons

The 4% Rule - Retirement Calculation Formula

The 4% rule is a principle recognized by financial experts worldwide: you can withdraw 4% of total assets annually without worrying about depletion. This means if you want 50 million VND per month in retirement (600 million per year), you need to accumulate 15 billion VND.

Important note: This rule applies to diversified investment portfolios with stable returns over many years. Nothing guarantees you'll always have profits, and all investments carry risks.

But what happens if you just delay 5 years? Counting only principal savings: starting from age 25 with 3 million per month for 40 years will yield 1.44 billion VND. Starting from age 30 for 35 years only yields 1.26 billion VND - 180 million VND less just from 5 years of delay.

Lessons from Singapore: The CPF System

Singapore has one of the world's most successful retirement systems with the Central Provident Fund (CPF). Each worker contributes 20% of salary, companies contribute another 17%, totaling 37% of income dedicated to the future. The result is that Singaporeans have very good living standards in old age.

In Vietnam, the social insurance contribution rate is only 18% (8% employee + 10% company), much lower than developed countries. This requires us to proactively supplement at least 15-20% of income for personal savings.

Investment Strategies by Age Group

Ages 22-30: "Planting Seeds for the Future"

Principle: Aggressive Growth

This is the golden period for asset accumulation with the highest risk tolerance. The main goal is to harness the power of compound interest over long periods.

Recommended investment allocation:

• 60% Stocks/Growth Funds: Invest in ETFs like FTSE Vietnam ETF, VanEck VN100, or blue-chip stocks with high growth potential
• 20% Bonds/Balanced Funds: To stabilize portfolio during volatile periods
• 10% Gold/Commodities: Hedge against inflation and diversify risks
• 10% Cash/Savings: Emergency fund for unexpected situations

Specific plan for 15-20 million VND monthly income:

• Save minimum 20% of income (3-4 million per month)
• Buy life insurance with 500 million - 1 billion VND coverage
• Invest regularly monthly in ETF funds (2-2.5 million per month)
• Allocate 500,000-1 million per month for emergency fund

Success story: Lan, 26, marketing executive, started investing 2.5 million per month in VN-Index ETF since 2020. After 4 years, her account grew to 180 million VND from initial capital of 120 million - 50% profit by leveraging market cycles correctly.

Ages 30-40: "Accelerating Accumulation"

Principle: Balanced Growth