Save for Future or Spend for Present?

Today’s youth is focused more on spending rather than saving. Kanika Nayar dives into the issue, providing insights and the way forward

How have we changed?

Our previous generations believed in saving more to ensure a better future for the coming generations. They built up assets to ensure that we have a more comfortable lifestyle. However, the youth of today do not have the same mindset. Our previous generations believed in saving more to ensure a better future for the coming generations. They built up assets to ensure that we have a more comfortable lifestyle. However, the youth of today do not have the same mindset. Today’s youth are spending more time on increasing the size of their wallets. The pay packages are much higher than those of our previous generations.

Young Indians are travelling all over the world to secure elite postgraduate degrees to build up their resumes and secure higher pay packages. This increase can be further reflected in the increase of per capita income which increased by 11.7% from the previous year. Indians are learning on increasing the size of their wallets. The pay packages are much higher than those of our previous generations. Young Indians are travelling all over the world to secure elite postgraduate degrees to build up their resumes and secure higher pay packages. This increase can be further reflected in the increase of per capita income which increased by 11.7% from the previous year. Indians are learning the art of spending, however, are we judiciously saving and prudently investing as well? Are we saving before pending or spending before saving?

What are the spending trends?

Consumer spending has exploded in India. Are we spending on necessities or luxuries? As times change, the definition of necessities and luxuries are also evolving and changing. As an example –

• Consumer items like vehicles and mobile phones which were luxuries until a few years ago are now available in many households.
• Food contributes the highest to consumer spending.
• Housing and consumer durable spend are powered by the young consumer who is purchasing newer homes and new appliances and equipment along with them. Every individual wants to own a property that he can call his own, whether it is possible within his means or not.
• There is a revolution of telecommunications in India with smartphones, tablets, portable music devices and televisions constantly being purchased.

The market is flooded with these devices and young consumers are lining up to procure them. The new generation consumers are influenced by these new technologies to a large extent and are willing to spend half of their pay package to buy a new device.

Spending on luxury goods

Despite the downturn of the economy, India’s ultra-rich continue to spend on apparels, luxury watches, electronics and overseas travel holidays. Increase in the disposable income of these ultrarich households has caused luxury spending to stay in fashion. For most, this lifestyle of luxury spending is a status symbol, to signify belonging to an elite club in society. Apparel and accessories dominated the luxury goods spend at more than 50%. Are we causing our savings to dwindle by spending on these luxury items which will become obsolete in the near future? The concept of these luxury brands was not in play during our previous generations as they were more focused on building a future for us. However, many of us opt to purchase luxury items frequently in lieu of saving for the future.

Are we saving?

Domestic savings are decreasing due to the fall of financial savings in households. High inflation, excessive spending, low level of investments in productive instruments are some of the main causes for this fall. It is not foreign capital that will come to the economy’s rescue; that role has to be performed by domestic investment. Indians are putting their money in short term instruments and not in investments that are long term and will be able to hedge inflation.  More than 40% of Indians consider jewellery as a good mode of savings and investments.

WHAT SHOULD WE DO?

• Save a certain percentage of our salary/earnings every month
• Invest in the right and correct places to ensure increasing returns
• Do not take impulsive purchase decisions
• Reduce spending on luxury products

Where should I invest?

Good, safe investment areas that the youth can consider if they want to ensure a stable return and do not want to take a risk:

• Mutual funds
• Fixed deposits – tax saving options are also available
• Government bonds
• Gold bonds
• Public provident fund
• National saving certificates

How are you spending your pocket money?

As a student, a perpetual state of being broke is considered normal. Hence, we ask four students to decode their spending and saving habits

Like most girls, I love shopping. I think it is one of my biggest weaknesses and the place where I spend most of my pocket money. But, lately, instead of going all out and buying clothes upon impulse, I wait till I have saved enough money and then go ahead and make a purchase. I am also trying to keep a written account of my purchase so that at the end of the month, I am not confused about where, how and what I spent my money on. – AYESHA HENRIQUES (BMS)

I firmly believe in using my pocket money wisely. To begin, I commute using buses instead of taxis or auto-rickshaws. As much as I love eating out, I try my best to avoid it. I’m also a movie fanatic and love watching movies first day, first show. However, lately, I have figured that movie tickets on the first day are overpriced. Hence, I choose to watch movies either a week after its release date on weekends, or on a weekday; I save a lot of my pocket money this way. – RYLAN RODRIGUES (HOTEL MANAGEMENT

Well, I do a lot of different things to save money. Since I love reading books and I’m studying English literature, I buy novels at book sales and second-hand stores instead of purchasing brand new copies. Also, when it comes to my fashion or clothing purchases, I steer clear of branded outlets and instead, choose to shop at Colaba Causeway and Linking Colaba Causeway and Linking Road in Mumbai. – TRISHA DUTTA (MA)

I believe in both spending and saving. While I like to indulge in canteen food and hang out with my friends, I also think saving is important. Music is my passion; so, whatever money I save, I use on buying instruments and other items for them. Of course, the money I spend on them comes from saving for months on end. – KAVITA MODI (BA)