The lockdowns, job losses and pay-cuts coupled with the rising consumer inflation is not just shrinking Indians’ discretionary expenses but also their savings. According to BankBazaar’s Savings Quotient 2020 survey unveiled Thursday, the respondents saw the average wallet share of savings reducing to 32% in 2020 compared to 38% in 2019. The study surveyed 650 digitally savvy working professionals in three age groups between 22 and 45 years across 5 major Indian cities with a monthly income of over Rs. 30000. Here are the key findings of the survey which highlight a few interesting personal finance trends in the country amidst the pandemic:
Pandemic shrinking people’s savings
The average wallet share of savings by Indians have fallen by 6% to 32% in 2020 compared to 38% in 2019. Simply put, the average wallet share of savings means the portion of income allotted towards savings, investments, and insurance purchases to secure our financial future. Unsurprisingly, the drop in savings has been higher for the two core-earning age cohorts: 28-34 year old “Moneymooners” have seen a 7.5% y-o-y drop to 30.5% and 35-45 year old “Wealth Warriors” have witnessed a drop in savings by 7% y-o-y to 30%. Interestingly, the savings drop is less steep for the youngest in the workforce, the 24-28 year old “Early Jobbers” with relatively fewer financial commitments, have seen a marginal drop by 5.3% y-o-y to 34.7%.
Most people saving to better tackle uncertainties
The survey also revealed that a whopping 70% of the respondents want to save to protect their interest against emergencies, medical or otherwise, compared to just 32% last time. This is an understandable reasoning following the sudden outbreak of the Covid-19 pandemic. That being said, 60% of the respondents want to save for improving their standard of living, while 47% respondents say they want to save to secure an adequate retirement corpus and inheritance for their children.
Average desired retirement age remains 56.4 years
The average retirement age across the three age cohorts remains at 56.4 years, the survey found. However, the average retirement age for the older “Wealth Warriors” has increased slightly to 58 years from 57.4 years last time.
25% respondents feel their retirement corpus should be more than Rs. 2 crore
The survey found that while 50% of the respondents feel their target retirement corpus should be between Rs. 50 lakh and Rs. 1 crore, 11% opine that should be between Rs. 2 crore and Rs. 5 crore, while 14% feel a corpus of more than Rs 5 crore should be sufficient for their retirement (25% when combined). These trends indicate that despite the challenges, India’s working professionals have already understood the importance of an adequate retirement corpus and have set their critical long-term financial goals.
Credit score awareness remains high
Indians are increasingly realising the importance of having a credit history and maintaining a good credit score. This trend is indicated in the survey as 90% of the male respondents and 88% women respondents say they have already checked their credit score.
Indians getting financially savvier
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.
Commenting on the survey, BankBazaar.com co-founder and CEO Adhil Shetty said, “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.” “When taken together with the high levels of credit score awareness and independent financial decision-making, it becomes obvious that despite misgivings, the younger generation is very conscious of the kind of financial products they use and take the time and effort to use them right to get maximum benefits,” he added.
BankBazaar.com, India’s leading online marketplace for loans and credit cards.