Money : How Indians Will Save and Manage it in 2025? - An Essay

This article was written by Mohit Gandhi, my son. He is an FMSian.

The spending and saving pattern of Indians, especially Indian youths, has changed drastically since the globalization which resulted in higher spending power. The present studies depict that Indians tend to spend more money on shopping and other exclusive items, such as branded clothing and merchandise. Further, with increasing westernization, and increase in employment rate because of rapid GDP growth rate, and various governmental initiatives such as Digital India, Make in India, Skill India etc., the skill level as well as income level of Indians are increasing, and thus making us have a larger amount of disposable income than ever before.

Generation X was raised on the belief that saving a certain amount of their income is imperative, and would always be used for emergency situations. Thus, for them setting up a decent savings account was one of the main challenges, and they made it necessary to set aside a portion of their income. However, with the present Generation Y or Millennials, saving has been on the decline, mainly due to the increase in the cost of living as well as other necessary costs. As per the website ‘dealsunny.com’, in one of their researches, they found that Generation X saved around 30% of their income, whereas the millennial generation saved only 5% of their income.

Also, if looked at the investment scenario, it seems that the younger generation is savvier when it comes to making investments. This shows that the millennials are ready to take more risks, and invest in shares/stocks which would give them higher returns in the future.

Owing to the same situation, and comparing our present generation to the US generation, it can be seen that in the future, the trend of saving money in the bank accounts would decrease owing to the high cost of living, whereas the trend of investing money would increase owing to the increase in the education level, and technological factors such as digitalization, and easy access to global markets.

Further, with the increase in the focus of Financial Literacy, it can be expected that more and more people would use less of credit card debt to purchase home, cars and other accessories, and thus help to reduce the consumer debt. It would also mean that the present generation and the coming generation would try and live within their means, thus decreasing the amount of money saved. However, this increase in Financial Literacy would mean that more and more Indians would invest in global markets, take more risks and thus also gain higher returns in a shorter period of time.

Going further, the pay and compensation are becoming the critical factors for today’s youths when finding a job. This means that today’s youths are aware of how much his boss and colleagues are making, thus providing a level playing field for all. This increase in the income level, coupled with the decreasing pressure of fulfilling traditional milestones can be an important factor when it comes to saving. Also, the youths in 2025 would sacrifice major purchases in lieu of services that provide direct access to the same products without any burden of ownership, think of Uber as taxi rental company. The money spent in marriages has also been decreasing, instead youths preferring to invest in markets, as well as the average age of marriage will increase from present 22 to at least 26, thus providing youths more chances to save money.

The advent of technology has presented the youths with tools that will help them to keep track of their spending habits and investments. Further, there would be advanced programs that would be able to give suggestions as to where a person can invest based on his risk taking capabilities and number of years he wants to invest the money in. The interest rate been given by the banks for saving accounts has been exceedingly low to make any impact on the retirement fund, and thus more and more people would be switching to quick, and easy to use tools to guide their investment plans.

The cost of education has been increasing in our nation, thus burdening students with more and more loans, which greatly influences their spending and saving behavior. This would prompt people to pay off their debts quickly before making any big purchases.

Thus, taking the cue from the present Indian generation, as well as the increase in the education and skill level, the habit of saving in the bank would actually decrease by 2025, and instead people would prefer to invest in shares/stocks by 2025, as they tend to give higher returns, help build the retirement plan, and can be both a short term as well as a long term tool. Further, the government needs to put the same focus on the digitalization, and globalization so as to give its citizens the same or level playing field, thus accessing the foreign as well as national markets. The companies or organizations would also need to come up with savvier technology that will help the future generation to invest and plan according to their needs and requirement.