To pinpoint exactly how Indians between the ages of 25 and 35 years navigate the choppy waters of personal finance, we did a study of the Aspiration Index of millennials. By analysing inputs from 1,551 respondents across 12 cities, the study put Aspiration Index of Indian millennials at 87.43, with Chennai leading the way and Jaipur following suit.
The Index encapsulates millennials’ ambitions basis 6 parameters—wealth, fame, image, relationships, personal growth and health, and the score is proof that the millennials of today are confident, driven, independent and value wealth and health.
Where Are The Gaps?
The only chink in the armour, perhaps, is a difference between certain aspirations of millennials and their readiness or ability to achieve them. Considering that the collective views wealth as a primary goal, the aspiration-readiness gap of 12 points—highest as per the Aspiration Index—certainly catches one’s eye. Simply put, this means that there is a disparity between the goal and the means to achieve it. Millennials aren’t making the moves they should to maximise wealth.
What Does Your Choice Of Investments Have To Do With It?
The good news is that most millennials divert a solid one-third of their wallet share to investments and give this, along with saving money, their full attention. However, their choice of investments is still widely restricted to instruments such as fixed deposits and life insurance. While these vehicles are safe, they fall short on offering substantial returns. This results in the widening chasm between readiness and aspirations.
What Should You Do Instead?
Among the myriad insights that the Aspiration Index offers on how millennials view personal finances, it found that creating wealth is a top priority across the board, with a special emphasis on owning a home. If this goal resonates with you too, it’s time to take measures to bridge the aspiration-readiness gap.
Increase Your Exposure: The Aspiration Index indicates that given your age, goals and working years ahead of you, your risk exposure is extremely limited. Instead of focussing solely on low-yield, low-risk instruments, diversify your portfolio to include equity, IPOs, mutual funds, Equity Linked Savings Scheme (ELSS), and bonds. This will offer you more chances of growing your wealth and getting inflation-beating returns.
Widen Your Outlook: Considering the fact that the right investment approach isn’t something that you’re taught, it is important that you take the effort to educate yourself. You can hire the services of a financial expert or dive into exhaustive online resources that are available to you. Read up on financial news, pay attention to the annual Budget, and be informed about changes in things like TRP for mutual funds or LTCG tax revisions for equity. This will help you have a better conversation with your financial advisor, and give you greater control on your finances.
Keep At It: There is ample evidence to show that millennials give short-term goals such as upgrading to new electronics or travelling every 6 months top priority. This is in contrast to Generation X that considered saving for retirement, real estate and emergencies more important. So, it is crucial that you identify this tendency, reign in temptations and approach making investments and savings as an on-going activity and not a one-off exercise. Take any losses you face in your stride, and create a diverse portfolio, with certain investments for long-term goals and others for short-term objectives.
With a better understanding of how your financial decisions may come in the way of achieving your goals, tweak your approach and you’ll see your aspirations turn into reality!
The writer is CEO, BankBazaar.
BankBazaar.com is a leading online marketplace in India that helps consumers compare and apply for credit card, personal loan, home loan, car loan, and insurance.