Household savings form an important component of the economy of any country. No two generations may look at savings in the same manner, simply because each generation is reacting to the socio-economic and political realities of the times they live in. For instance, the millennials.
Millennials are those born in the period between 1981 and 1996, and this demographic constitutes 47 percent of the workforce in the country. It is essential to understand their spending and saving habits to understand how differently they save from the previous generations.
Millennials are the generation that’s most comfortable with going online and transacting, booking shows and ordering cabs on their smart devices. They have brands reaching out to them, and not the other way round. They value experiences, and therefore, the rise of brands putting experiences ahead of everything else. Co-working, world travel and co-living are all lapped up by urban millennials.
The urban-rural divide is also being bridged, and according to an IMRB-Kantar study (1) on The Rural Millennial Market, millennials constitute 36 percent of the rural population, and there is urban migration and greater digital footprints. This means that both rural and urban millennials now have greater aspirations and exposure to technology. This has made an impact on the way they save as well. As banks and financial institutions offer app-based and mobile-based products and services for savings and investments, more millennials find it easier to transact online.
image source: LiveMint*
How do millennials save differently from their parents?
It is interesting to note that while millennials do spend, they also save, contrary to stereotypes. According to a study (2) conducted by a transfer agency servicing a large percentage of mutual funds in India, 47 percent of the overall new investors it got on board in 2018-19 were millennials. This goes to show that millennials are taking to investments such as mutual funds, as opposed to say, fixed deposits, gold or post-office schemes that their parents sought to use for their savings. A lot of millennials opt for systematic investment plans (SIP) for their mutual fund investments. One of the popular methods is to choose equity-linked savings schemes which come with a short lock-in period and have tax benefits. Millennials may also opt for unit-linked insurance plans (ULIPs) more than their previous generations.
What do millennials save for?
Yet another study (3) by an online marketplace for financial products showed that millennials start saving early, at 25 in many cases, and save a significant chunk of their income — 40 percent. Their reasons for investing, according to the study, is to improve their standard of living, which means a better car or house, or saving for post-retirement and expenses that are unexpected. At the same time, millennials don’t hesitate to spend on things like travel, leisure or apparel. The study shows that the highest expenses, apart from their children’s education plan at 45 percent, was travel at 25 percent and leisure at 24 percent.
The YouGov Mint survey (4) points out that pre-millennials seem to be the more likely generation that thinks of saving up for emergencies, including health setbacks or job losses compared to the other groups, i.e., the millennials or Gen-Zers. Also, while 46 percent of pre-millennials said they were saving for their children’s education, only 35 percent of millennials used this reason for saving.
Planning for retirement?
It has been a popular narrative that the pre-millennials are more conservative and save more for retirement than millennials. However, the YouGov-Mint survey says that pre-millennials in India tended to save more for retirement while millennials and post-millennials saved for homes or cars.
To conclude, millennials are indeed faced with more choices than the previous generation, thanks to the emergence of online marketplaces and more awareness about savings and investment products. They are choosing to save but are also looking for experiences — exploring the world is just one of them. This is a generation that is trying to strike a balance between savings and spending, wanting to do a bit of both. Millennials in India are experiencing a world that is constantly changing, thanks to the emergence of new technologies, and therefore their method of saving may differ.
With a surge in the availability of digital banking services, saving has never been easier. For instance, all you need to do to open an RBL Bank Digital Savings Account is enter your PAN number, Aadhaar number and voila! You now have a safe and secure Savings Account with high-interest rates and optimum flexibility. And so, millennials may seek online platforms for the sheer convenience but save they will.
To know more about RBL Bank Digital Savings Account, please click here.