Buying a home is the first preference of Millennials and Gen X in India. Millennials are people born between 1980 and 1996. Gen X people are born between 1965 and 1980. These two categories are the highest income earners, and their future investment plans include buying a home as a top priority.
In a survey of over 7,500 people of multiple generations and incomes for the industry body Federation of Indian Chambers of Commerce and Industry (FICCI), Anarock Research, a real estate consulting firm, provides interesting insights. About 66% of the Millennials and 41% of Gen X are keen to buy a home. Regarding the young, represented by Gen Z, 39% say they want to start a business. These are people born between 1997 and 2012.
When asked about retirement, only Gen X and the previous generation, Baby Boomers (people born between 1946 and 1964), prefer that.
When people prefer physical assets for investments, that should be a matter of concern. The government of the day should take serious note of it. That means people believe retirement is possible only if you own a house. It also shows the inadequacy of retirement planning and execution at all levels.
In America, a third of households prefer real estate, according to the US Census. Most of the allocation is to financial assets through retirement accounts and investments in the stock market through mutual funds or directly. That shows the confidence Americans have in their financial system.
The US government deserves to be credited for creating an environment conducive for small savers to deploy their life savings into risky assets like equity. A robust retail market for equity and bonds makes America an attractive destination not just for Americans but for foreigners, too.
It is a no-brainer that India needs to have a robust financial system with vibrant capital markets if it wishes to realise the dream of being a developed country by 2047. It is a challenge like none other for a nation that has nearly 150 crore people.
The government must create an economy that makes investments simple for all categories of investors. India needs enormous sums to build robust physical infrastructure to drive growth. The government has highlighted that in the PM Gatishakti and other reports published by the Niti Aayog. The government must also allocate significant resources towards social infrastructure, including health, primary, secondary and tertiary education and social security.
The government also needs to invest significantly in women to boost economic growth. It makes no sense if half of the population lags in formal employment as it drags India’s economic growth. A mere 5% increase in women workers could add a percentage to the GDP that hovers around 7%. In the world we live in today, there is a significant growth rate. However, it is not enough for India to achieve its domestic goal of being a developed nation by 2047.
What it means to you
The key takeaway from the FICCI-Anarock survey is that retirement and emergency funds are not a priority for Millennials or younger people.
That shows you are not seeking any professional advice or you are not getting the right advice. For industry associations of mutual funds, insurance, banks, and regulators like the Reserve Bank of India, Securities and Exchange Board of India and Insurance Regulatory and Development Authority, it is a challenge to correct financial literacy.
If you glance through the financial literacy literature of the US Securities Exchange Commission, it starts with some advice on the ‘pay yourself first’ concept.
When you start work, you must put aside a small portion of your monthly income for your future. To the Indian government and regulators’ credit, India has a vibrant stock market. It is one of the best-regulated secondary markets for securities.
However, the investment cult still prevails in urban areas. Although states like UP are witnessing increased participation, most are in risky assets like stocks and derivatives. Like primary education, financial planning and literacy must be part of the national agenda. An important topic to be taught is asset allocation. If you do not understand the concept, you will continue to hang on to physical assets.
