The survey also showed that people are increasingly embracing mutual funds and investing through SIPs (Photo: Mint)
The survey also showed that people are increasingly embracing mutual funds and investing through SIPs (Photo: Mint)

Indians are starting to save for retirement early, but is it enough?

  • Indians have start saving early, but not always with a clear picture of how much of a corpus they will need
  • Fixed deposits, endowment policies are still the most common ways of investing with 86% respondents saying they preferred it, followed by recurring deposits

Indians are increasingly becoming conscious of the need to save and invest, but can’t seem shake off the fondness for safe investments. According to BankBazaar Savings Quotient survey, which has been released as a follow-up to the BankBazaar Aspiration Index 2019 (released in July), the financial habits of Indians have evolved. They now make use of credit in a calculated way to meet lifestyle expenses and other goals. They also start saving early, but not always with a clear picture of how much of a corpus they will need.

According to Adhil Shetty, CEO, BankBazaar, the way Indians save, spend and borrow has undergone a sea change over the past decade. “Today, access to credit is much easier compared to a decade ago. Of the respondents, 93% had some form of credit. But despite having multiple lines of credits open, more than 80% of them spend only 30% or less of their monthly income to service these debts. This shows that the average Indian is very conscious of the kind of financial products they use and take the time and effort to use them right to get the maximum benefits," said Shetty.

The survey also revealed that most people start saving early in their life, beginning around the age of 25. The main reasons Indians save are to increase the standard of living (25%), followed increasing interest income (17%) and to tide over emergencies and unexpected expenses (15%). However, when it comes to investing, Indians haven’t made it past their fondness for traditional products. Fixed deposits and endowment policies are still the most common ways of investing with 86% respondents saying they preferred it, followed by recurring deposits. But the survey also showed that people are increasingly embracing mutual funds and investing through SIPs.

The expectations regarding retirement have also changed over time. While 60 was widely accepted as the standard age of retirement by previous generations, the survey shows that the average Indian now plans to retire at the age of 56. They also start investing to build a retirement corpus fairly early, at around 29 years of age. However, despite the early start, the size of the corpus for more than 80% of the respondents is between 50 lakh and 2 crore. Only 11% said they were planning to build a corpus of 2-5 crore, and an even smaller 8% said they were aiming to salt away 5 crore by the time retirement rolled around. According to Shetty, while this may seem appropriate now to a 28-year-old who is starting to save, but the amount may fall short for the post-retirement period of close to 20 years, starting 30 years from now, especially for an urban Indian, who is used to particular standard of life.

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