Savings by the Indian working professionals have shrunk this year against the combined onslaught of recession, pandemic, and lockdown. The higher consumer inflation coupled with job losses, paycuts and furloughs mean people have less money to spend despite putting a break on discretionary expenses, reveals a BankBazaar survey.
As per the second edition of the BankBazaar Savings Quotient, the average wallet share of savings has dropped to 32% compared to last year’s 38%. Early Jobbers continue to be the biggest savers, setting aside almost 35% of their salary, while the Moneymooners and Wealth Warriors saw their wallet share of savings fall to 30.5% and 30%, respectively.
Unsurprisingly, the drop is highest among the core earners: the Moneymooner aged between 28-34 years and Wealth Warriors aged 35-45 years, who faced the brunt of the slowdown. Moneymooner saw the wallet share of savings fall by 7.5% to 30.5% from 38%. The Wealth Warriors followed closely, as their savings fell from 37% of their income last year to 30% this year – a steep fall of 7%. The Early Jobbers (aged 22-27 years) were comparatively better off, with an average wallet share of 34.7%: a drop of 5.3%.
The silver lining, however, is that people are reacting to uncertainties with a greater degree of financial planning.
Reasons To Save
Market fluctuations and job uncertainties are making people focus on long-term goals for self and family, putting aside discretionary goals like luxury and travel. Expectedly, emergency savings have become the biggest reason for saving for 70% people vs 32% last time. While increasing the standard of living is important, long-term savings for retirement and securing inheritance have gained higher importance.
Average Retirement Age & Corpus
The average retirement age across age cohorts continues to remain 56.4 years. However, the average retirement age for the older Wealth Warriors saw a slight increase from 57.4 years last year to 58 years.
Also, the percentage of people with a target retirement corpus of Rs 2 crore or more has gone up to 25%, indicating better long-term financial planning.
People are increasingly taking control of their own finances. 76% of men managed their finances themselves compared to 66% women. Almost 38% of women trusted elders in the house for their financial planning while 32% of men preferred to consult family friends and advisors, the study reveals.
Commenting on the study, Adhil Shetty, Co-founder and CEO, BankBazaar, says, “Data shows people are reacting to the uncertainties of the last few months with a greater degree of planning in financial matters than before. When you look at the savings data, predictably, emergency savings have become the biggest reason for saving for 70% people vs 32% last time. At the same time, as falling returns make an impact, there is increased focus on long-term planning for retirement (46%) and securing children’s inheritance (47%) compared to earlier. We are seeing close to 25% people are planning for a corpus of Rs 2 cr, compared to 20% last year. This is a heartening trend, as it points to long-term, goal-based planning that is more rewarding in the long run.”
The study emphasises that this generation believes in using all available financial products to fulfil their aspirations smartly. More than 89% of those surveyed had some form of credit, be it credit cards or secured or unsecured loans. At the same time, they are also very careful about how they deal with credit. Data shows that 78% people spend less than 30% of income as EMIs despite having multiple lines of credits open.
The second edition of the ‘BankBazaar Savings Quotient’ is a follow-up to the 2020 BankBazaar Aspiration Index (BAI) released this July. The Savings Quotient findings reflect the pandemic’s impact on people’s wallets. The 2020 BAI attempted to understand Indian working professionals from the perspective of their aspirations. The Savings Quotient presents a reality check on their perceived capability to achieve their aspirations by rendering a coherent picture of their financial habits.