Educating Indians on need to save as culture of youngsters is changing

In the earlier years, when the current generation of young adults were mere toddlers, pensions were commonplace, providing additional income to support their parents during retirement. However, times have since evolved.

The concept of secure employment, once heavily reliant on pensions, such as within government organizations or public sector enterprises in the past, has evolved into a model where individuals in the workforce today must rely on their own savings from their salaries. This transformation is not limited to the public sector; it is a broader trend. The primary driving force behind this shift is the increasing availability of job opportunities. Gradually, the government is transitioning towards outsourcing its functions, serving primarily as a facilitator rather than a direct administrator.

For instance, consider a passport office where approximately 80% of the verification process is outsourced to a third-party organization. Consequently, the government is reducing its continuous hiring practices, thereby diminishing the job security that was more prominent in the past.

Today, people are less anxious about their financial future because their current incomes far surpass what their parents once earned. Consequently, they experience greater financial comfort in their early earning years than their parents might have envisioned when it comes to buying a house, whether at the age of 45 or as early as 30. These increased earnings have given rise to a prevailing culture of consumerism. While the previous generation was primarily focused on essentials such as asset accumulation, financial management, and prudent resource allocation, the current generation places a greater emphasis on indulging in luxuries and elevating our living standards, reshaping the perception of life itself. This consumerist outlook has led to a trend of extravagant spending, often at the expense of savings.

Pensions remain an elusive concept, despite the presence of social security tools such as the Provident Fund, which often constitutes only a modest portion of one’s earnings. Given this scenario, it falls upon the employee to make a deliberate decision to allocate a specific amount of money toward their retirement fund. Typically, this endeavor is promoted through methods such as saving, investing in mutual funds, or maintaining bank savings accounts. Traditional small-scale savings practices have receded in importance. The government has shifted its focus away from encouraging small savings, and as a result, urban dwellers have increasingly succumbed to consumerism.

During job transitions, urban residents frequently find themselves in a financial bind, lacking a stable source of income. This presents an ideal opportunity to educate young individuals about the importance of saving in proportion to their earnings and living circumstances.

How do we bring this about?

Developed nations, such as the United States, have robust systems in place to address emergency healthcare and unemployment needs. While the current government aims to move towards a similar model, including the concept of Universal Basic Income, the initial focus is on those living below the poverty line. Given the vast population and diverse economic conditions across Indian states, achieving this goal is a challenging endeavour and unlikely to cover a significant portion of the population for at least a decade.

The investments made through Provident Fund (PF) are primarily earmarked for retirement or pension purposes. Consequently, an average income earner cannot rely on these funds to weather early-life crises, even if they consistently contribute to PF and government pension schemes. The recent amendment to PF rules, allowing for easier withdrawal, particularly during periods of unemployment, is a positive step. However, it remains too early to determine if this will adequately address individual needs for healthcare and unemployment support.

Furthermore, the rising trend of consumerism, which is not limited to urban nuclear families, leaves little disposable income in the hands of the breadwinner. Escalating housing and education costs further compound the financial challenges faced by an average earner.

Changes in lifestyle also play a significant role. For instance, the lifestyle of someone from Tumkur, near Bangalore, differs markedly from that of an individual living in Bangalore, and maintaining that lifestyle requires additional expenditure. Aspirational life choices necessitate higher spending, and it is essential to recognise that to sustain a desired quality of life, one must save accordingly.

The concept of savings often goes unnoticed by young individuals until they encounter financial difficulties. Once a particular standard of living is established, it becomes imperative to maintain it. Therefore, it is advisable to opt for a moderate lifestyle and save accordingly. Savings serve multiple purposes, including addressing emergencies, funding significant expenditures such as weddings, education, housing, maintaining a moderate lifestyle, and managing crises effectively. In light of these four paradigms, one must adopt a savings strategy that aligns with their chosen standard of living, as maintaining it requires disciplined savings.


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