The covid-19 pandemic has not only claimed jobs and livelihoods for many Indians but has consequently depleted their savings as well. A report titled Bankbazaar Savings Quotient shows that the pandemic has resulted in shrinking of savings, compelling many Indians to reorder their priorities.
Of those surveyed, 70% reported saving more due to unexpected expenses. Here are some of the other key takeaways from the report.
“Over the last year, the combined impact of the recession, the pandemic and the lockdown has meant that people have less money at hand, whether to spend or save. This reflected in the reduced wallet share for savings,” said Adhil Shetty, CEO, Bankbazaar.
This year’s survey, conducted among 650 working professionals aged between 22 and 45, across five Indian cities, showed that average savings stood at 32% of income levels, having witnessed a 6% drop from the last year’s average of 38%. The steepest drop was recorded for those between the ages of 28 and 45 years. Those between the ages of 22 and 27 were relatively better off, their wallet share of savings having dropped 5.3% to 34.7%.
Shetty added that with the market fluctuations and falling interest rates, interest income has become a smaller factor for people. “While last year’s report had shown that interest income from investments was one of the top three reasons people were investing, this year, it has fallen to the fifth place,” he said.
Shift in priorities
Perhaps the one positive outcome of the uncertainty following the pandemic could be that it has driven home the significance of financial planning and security, compelling many to rethink their priorities. “People are beginning to understand the importance of long-term planning. This is evidenced by the importance given to both retirement and inheritance planning,” said Shetty.
“Market fluctuations and job uncertainties are making people focus on long-term goals for self and family, putting aside discretionary goals like luxury and travel. Expectedly, emergency savings have become the biggest reason for saving for 70% of the people compared with 32% last year,” he said. While increasing the standard of living is still important to people, with 60% saying it was the reason they were saving more, long-term savings for retirement and securing inheritance have gained higher importance.
Falling interest rates and spiking inflation are making more people concerned about retirement planning and the need to have an adequate corpus. The report showed that close to 25% of people are planning to accumulate a ₹2 crore and above as retirement corpus compared with 20% last year.
But the need for a larger corpus might mean staying in the workforce for a longer period. “The impact of the uncertainty and lower returns is seen, especially among those between the ages of 35 and 45. For them, the retirement age went up from 57.4 years to 58 years, indicating that they are less sure about the amount they can put aside every month as well as the returns they hope to get from their investments,” Shetty said.
However, the average age at which people expect to retire has remained steady at 56.4 years, the same as it was in last year’s report.
Like many other aspects of our lives, the pandemic has altered the way Indians save and invest. But as with any major crisis, it has brought home the realities of people’s financial lives, compelling them to focus on securing their financial futures with emergency funds in place and more money allocated to long-term investments.