India has been traditionally a nation of savers. We have managed to spend less than our income and save the maximum possible amount out of regular income for securing our future. This has also meant postponement of current consumption for a better future.
Maybe, we have not learnt to invest our savings wisely, over the years — as the bank deposits figures will tell us. But all the same, we have been doing reasonably well, post retirement, mainly because of this savings “culture”.
The big question that faces all of us now is: Whether this savings culture is changing? Recently, I addressed a group of fresh recruits of officers in a public sector oil marketing company. I was explaining the virtues of investments and how to plan for meeting the various life goals from a young age.
The group comprised very enthusiastic men and women in the age group of 25-30 years. They appreciated the presentation but one gentleman asked this very important question: “Why are you advising us to save from our salary and invest? What is wrong if we spent our salary on luxuries of life? Why should we not borrow money through credit cards and banks to buy cars and bigger houses and enjoy our life to the fullest at this young age, just like the Americans do?”
I have more than two decades of expeience in advising all age groups of individuals on savings, investments and financial planning but I have never come across a question like this. This is clearly the way the young Indian generation is thinking.
I have been collecting personal information regarding the present state of income and expenditure, assets and liabilities from clients to advise them on financial planning. Of late, I find that the middle aged corporate managers/executives, in the age group of 35-45 years, have very fat pay cheques — much fatter than what thay used to get a few years ago. The unfortunate part is more than 60% of the post-tax salary income, in several cases, is used to pay EMIs on home loans, car loans, consumer durable loans among a host of other loans.
The question raised by the young man as well as the EMI fixation of middle-aged salary earners is setting an alarming trend. Not very long ago, during October 2008 to March 2009, these same middle-aged executives were scared of their future because of the economic downturn and were selling assets to bring down their EMI commitments.
We all learn from history and we also know that history repeats itself. It is nice to be aggressive. There are no arguments against having a decent life with almost all luxuries at a young age. India is proud of its domestic consumption story.
India needs its people to spend. All the same, we should not be carried away by the easy spending consumer culture of the West. One look at the so called “developed economies” will convince us about the virtue of savings “culture” of our country.
In many developed countries “social security” for a senior citizen lies only on paper. The ground reality is that people in the advanced age of 70-75 work in malls at cash registers, airports cleaning the wash rooms, rent-a-car companies, transporting people to and from airports and so on. The Indian middle class may not enjoy a great standard of living but the savings culture definitely ensures that they need not slog at the age of 70 and 80.
Let us stick to our culture — save today; invest regularly and wisely and ensure a safe and comfortable future.
(The expert is Investment Consultant, Trendy Investments
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