The beginning of your first job will be very exciting indeed. Apart from the salary and offer letter that you receive, there will be another term which goes by the name of PF or Provident Fund. New employees get to see PF deducted from their salaries but may not know the significance of the same. It would be worthwhile for you to learn about PF in order to understand one of the best methods of saving money available to salaried employees.

What is PF?

Provident Fund (PF) is a scheme wherein savings for retirement purposes are made by salaried employees. A portion of your salary is deducted every month into your PF account and even your employer contributes a certain sum towards your PF account.

Why Does PF Get Deducted From Your Salary?

Quite a number of individuals tend to get shocked seeing their first salary credit and observing the fact that the actual amount received is somewhat lesser than the salary they anticipated getting. It is so due to the fact that the deduction on your salary goes into your PF account. Even though it might seem as a deduction currently, in reality, it is savings for your future.

Benefit of Compounding

The power of compounding can be considered one of the biggest benefits of PF. Your contribution, the contribution made by your employer and interest keeps growing. The sooner you start investing, the more time your funds have to grow. Despite being small every month, the sum keeps on increasing and reaches a considerable amount at the end of your working life.

What is UAN?

When you start your first job, you get allotted a Universal Account Number (UAN). Your UAN remains the same throughout your career and helps link PF accounts created by different employers. This makes it easier to manage your PF balance when you switch jobs.

Is It Time to Withdraw from PF?

Many workers think of withdrawing PF money while changing their jobs. However, PF is meant mostly for long-term retirement savings. By maintaining your PF and transferring the same while changing jobs, your savings will grow in the process.

Update PF Information

It is always advisable to keep all relevant information regarding your Aadhaar, PAN, mobile number and even your bank account up-to-date. This will ease future services related to PF. It is also a good practice to review the PF passbook at regular intervals to confirm if contributions are being made to the right account.

The Beginning of Retirement Plan

First job is not only the start of your professional life but also of financial life. Learning about PF from the early stages of your life is important since it helps you understand how to save money in the long run. Although you will find PF contributions as a small deduction today, it will be one of the greatest assets you will earn throughout your working life.

Connect with Aetram if you want to understand personal finance, EPF and wealth creation better.

FAQs

1. What is PF in a salary?
PF (Provident Fund) is a retirement savings scheme where both the employee and employer contribute regularly.

2. Why is PF deducted from my salary?
PF deductions help build long-term savings that can support your financial needs after retirement.

3. What is a UAN?
The Universal Account Number (UAN) is a permanent number that links all your PF accounts throughout your career.

4. Can I check my PF balance online?
Yes, employees can usually check their PF balance and passbook using their UAN through EPF services.

5. Should I withdraw my PF when I change jobs?
Many employees choose to transfer their PF balance instead, allowing their retirement savings to continue growing.