The latest release of the “Savings Quotient”, BankBazaar’s annual survey report on saving and investing trends in India, discloses that mutual funds remain the top investment choice for Indians, closely followed by fixed deposits. Nevertheless, a significant majority of individuals still favour placing their funds in savings bank accounts.
Conducted nationwide, the survey targeted individuals between the ages of 22 and 45 years, encompassing both men and women. Participants were queried on various aspects, including their saving habits, the purposes for which they save, and the extent of progress they have achieved thus far.
How do Indians invest?
The impact of enhanced financial literacy is apparent as an increasing number of individuals are now engaging in mutual fund investments. Mutual funds remain the preferred investment option for Indians, with fixed deposits following closely behind. Investors stuck to the trammels of convention when deciding how to invest their money for greater returns. This year, individuals predominantly opted for conventional investment avenues, including fixed deposits, stocks, and mutual funds. Nonetheless, a significant majority still opt to keep their capital in savings bank accounts.
Nevertheless, there were challenges on the savings front. Geopolitical tensions and elevated inflation have significantly impacted global economies, and India is no exception. The stagnation of savings for the majority of Indians in 2023 is a worrisome trend, with only slight improvements for a select group indicating the uneven effects of these pressures.
Reports may not capture attention without the infusion of intriguing names for the characters, which bestows upon them a unique and distinct identity. Individuals within the age range of 22-27 years were labelled as “Early Jobbers”, while those in the 28-34 years age group were identified as “Moneymooners”. The last category, encompassing individuals aged 35-45 years, is referred to as “Wealth Warriors” for explanatory purposes.
The survey data unveiled that among Wealth Warriors (61 per cent), Moneymooners (56 per cent), and Early Jobbers (45 per cent), mutual funds held the position of the second-most favoured investment. Intriguingly, fixed deposits (FDs) achieved nearly equal popularity among the older segments of Moneymooners (56 per cent) and Wealth Warriors (57 per cent) but fell behind in capturing the interest of Early Jobbers (43 per cent).
Nationwide, savings bank accounts retained their status as the most favoured financial product. Contrary to the previous year, fixed deposits surpassed mutual funds to become the second-most preferred investment in the North (62 per cent), East (61 per cent), and West (59 per cent) regions. Mutual funds were favoured more by men than women across various age groups.
Investment choices are not gender neutral
The gender distribution in investments shows slight variations. A higher percentage of men (79 per cent) opted for savings bank accounts compared to women (76 per cent). However, in contrast to 2022, this year witnessed a decrease in the proportion of women investing in mutual funds, with only 50 per cent of women participating compared to 56 per cent of men.
For Early Jobbers, 28 per cent of men chose to invest in mutual funds, while the corresponding figure for women was 21 per cent. This pattern persisted among MoneyMooners, with 59 per cent of men and 52 per cent of women opting for mutual funds. Similarly, among Wealth Warriors, 63 per cent of men and 59 per cent of women followed the same trend in favour of mutual funds.
The third most favoured investment, fixed/recurring deposits, was selected by 53 per cent of women in contrast to 50 per cent of men. The disparity between men and women participating in stocks has slightly increased from 7 per cent last year to 8 per cent in 2023, with 39 per cent of women purchasing stocks compared to 47 per cent of men. Contrary to the trend in the previous year, a lower percentage of women opted for riskier investments like cryptocurrency this year compared to men. Public Provident Fund (PPF) at 26 per cent and real estate at 19 per cent were the only two products chosen by an equal percentage of both men and women.
Stagnated savings – a cause for concern
The year 2022 witnessed geopolitical turmoil and inflation, which had a direct effect on individuals’ savings, leading to an overall reduction or stagnation. In 2022, 47.3 per cent of survey respondents indicated a decline in their savings, a figure that decreased to 41.7 per cent in 2023.
With the economy displaying indications of stabilization, there was a slight uptick in the proportion of individuals who successfully increased their savings. In 2023, 21.3 per cent of respondents noted an improvement in their savings, compared to 20.6 per cent in 2022. However, over the past year, a greater percentage of people experienced stagnation in their savings. In 2023, 37.0 per cent reported no change, an increase from 32.1 per cent in 2022.
The surge in savings is primarily propelled by Wealth Warrior women (28 per cent), closely followed by Early Jobber women (24 per cent). Similarly, in the previous year, women took the lead as the more significant savers, with 32.4 per cent of MoneyMooner women and 22 per cent of Wealth Warrior women witnessing an increase in their savings.
The rise of remote work (WFH) allowed older women to curtail various expenses, including additional childcare, leading to an augmentation in savings. However, as WFH diminishes, the growth in savings has also declined, with only 20 per cent of MoneyMooner women experiencing increased savings this year.
Post the pandemic, which witnessed a surge in medical expenses for many individuals, saving for emergencies such as hospitalization emerged as the primary reason for savings across all age cohorts—Early Jobbers (57 per cent), MoneyMooners (62 per cent), and Wealth Warriors (61 per cent). Both non-metros (64 per cent) and metros (61 per cent) also accorded high importance to saving for medical emergencies.
The second-most crucial motivation for saving among MoneyMooners (52 per cent) and Wealth Warriors (58 per cent) was the well-being of their children and inheritance. Intriguingly, 45 per cent of Early Jobbers selected lifestyle upgrades such as a new house or vehicle as the second-most important reason to save. In the third position was earning income through interest, increased market value of assets, etc., a reason unanimously chosen by Early Jobbers (43 per cent), MoneyMooners (50 per cent), and Wealth Warriors (51 per cent).
The unfortunate aspect is the reduction in savings, but on a positive note, women now play a leading role in savings and investments. While the empowerment of women in financial matters is encouraging, it’s essential to recognize the intricacies of the current situation. The decline in savings is a concern that impacts everyone, irrespective of gender, leading to significant repercussions.
Persisting reliance on secure yet low-return investment avenues, such as fixed deposits, underscores the necessity for comprehensive financial education and solutions to tackle broader economic challenges.
The worrisome factor is the impact of external circumstances on people’s ability to save compared to previous times. Nonetheless, the remarkable progress of women spearheading savings and investments is commendable. This development holds promise for future financial stability and could contribute to a more equitable distribution of wealth. Nevertheless, it remains imperative to ensure universal access to resources and opportunities for building savings, regardless of gender.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it’s all here, just a click away! Login Now!
Download The Mint News App to get Daily Market Updates.
Published: 29 Dec 2023, 09:17 AM IST