According to research done by ArthaYantra, the top three goals of an Indian family are Education of a Child, Buying a Home and saving for Retirement. As one goes through the life’s cycle, they are posed with situations that force them to make financial choices. These inflection points play a key role on the determining the way forward for most of us. They are also the points at which most of us have a heightened sense towards personal finance and decisions around them. Some of those inflection points are discussed below.
Education of Child
It is expensive to save for education. The education inflation varies from 15% to 25% a year. When a child is born, parents are determined to save well for the child’s future. However, the inflection point in savings only comes when the child has to be admitted into a school. That is a point when, parents realize that they have a daunting task of saving for a long term. There are two paths that parent can take, the easy one, which would involve buying a child plan. Which is not necessarily an optimal one and the tougher path which involves saving with discipline on a monthly basis into a diversified investment portfolio. The choice of the path could also determine if the parents are building enough to fund the future education expenses.
Buying a Home
At 30, India has one of the youngest average ages of being home owners. No wonder the Indian dream is to be a home owner. However, saving for the down payment, interiors, registration are mostly underestimated. These payments account for almost 35% of the total cost of the house that is ready to move in. Since it typically a large sum, potential home buyers are expected to save up before making a decision on buying a home. Indian home buyer relies on family, friends, personal loans and credit cards to meet these spending needs. Saving for the home and clearly identifying all the related costs to be incurred is a good beginning.
Retirement is the third most important goal for new India. The socio economic changes in the country are prompting more people to save for retirement. Most of the professionals in India do not look at retirement savings soon enough. An average professional, looks at retirement seriously only after the age of 36. In many cases by the time retirement related decisions are made, it is too late to save substantial sums of money. Investors have an option of buying retirement plans or saving into diverse portfolios. Whatever the decision, Provident Fund (PF) is a very important product in the portfolio that needs to be guarded fiercely.
Our changing lifestyle has made it important that savings become an important part of our life. Savings that are driven by clear lifecycle driven goals can help professionals demarcate savings and create pots of money that directly help them improve their financial stature.
Written By Arthayantra