Savings Outlook Of Young Indians: Stocks Pip Mutual Funds As The First Choice

The saving habits of Indians, especially the younger cohort, have changed significantly in the past few years. Millennials and Gen Z are more inclined not just to save but ‘to invest’. Gullkas do not bind them and rather they prefer to venture out into the stock markets looking for returns on their saving-cum-investments.

A recent report by Fin One, a financial awareness initiative by Angel One, reveals that 93 per cent of young adults are consistent savers, with the majority saving 20-30 per cent of their monthly income.

The report, titled ‘Young Indians’ Saving Habits Outlook 2024’ highlights how young adults in India, mainly millennials and Gen Z are approaching their financial strategies in response to changing economic conditions and technological advancements.

Moving Towards Culture of Consistent Savings & Investment

Based on responses from over 1600 young Indians across more than 13 cities, the report finds that around 93 per cent of young Indians call themselves ‘consistent savers’ wherein they set aside 20 to 30 per cent of their monthly income for future financial goals. The trend shows an evolving culture of financial discipline among the young cohort, those in the 22-25 age group, as they start their financial journey early on in their careers.

However, this young group is also overwhelmed by their financial pressures. Around 85 per cent of respondents cited high living costs, majorly food, utilities, and transportation as barriers to their saving goal. With inflation and the cost of living on the rise, balancing necessary expenses while meeting savings goals remains a persistent challenge

Stocks And Mutual Funds Lead Investment Choices

The stock market is catching the attention of young investors pretty fast with around 58 per cent choosing stocks as their primary investment avenue. This is followed closely by 39 per cent of young ones who prefer mutual funds.

Such a shift toward equities reveals a willingness to join the bandwagon of potential high-risk with high rewards in terms of investment. For 18 to 21-year-olds, the interest in the stock market seems even more pronounced with 72 per cent favouring this option over traditional alternatives such as fixed deposits, mutual funds, and gold.

The recent data released by the Association of Mutual Funds of India (AMFI) for October 2024 supports this rising investment choices by the Indians. According to the data, the number of SIP accounts stood at its highest ever at 10.12 crore last month as compared to 9.87 crore in September. In the last month alone net 24.19 lakh SIP accounts were added reflecting a bullish participation of retail investors in Indian markets. The number of new SIPs registered in October 2024 stood at 63.69 lakh.

The tilt towards mutual funds, the second most popular investment vehicle among young investors shows a balanced approach to wealth management. MFs, with their diversified exposure and professionally managed portfolios, are holding a greater appeal to those seeking steady returns while limiting direct exposure to the stock market volatility.

Fixed deposits and recurring deposits, however, are not very attractive to this cohort. Only 22 and 26 per cent of young Indians, respectively, favour these investment options. This further suggests a generational departure from conventional financial security options.

Where Are The Young Investors Learning From?

A remarkable 71 per cent of the respondents identified themselves as financially literate. Interestingly and aligning with the current digital scenario, 62 per cent of young Indians say that they rely on YouTube as their primary source for financial learning.

Family and friends remain a secondary source for financial advice, a testament to the generational trust in online resources. This points a concerning picture as to whether people are being swayed by influencers or gaining actual insights from online sources.

Technology seems to be the driving force behind the changing financial behaviours of young Indians. 68 per cent of respondents cite regularly using automated savings tools and mobile apps to manage their finances.

The data shows that fintech is playing a key role in wealth management for young Indians with the addition of automated contributions to savings and tracking investment portfolios with a tap.

Says Paarth Dhar, Vice President, Angel One, a listed retail stock broking house, “In today’s digital age, with rising cyber threats and evolving financial landscapes, it is more important than ever for young adults to build a strong foundation in financial literacy. Saving and investing are not only essential life skills but also key opportunities for long-term wealth creation.”

Surely enough, it has become ever more important for the young generation to adopt financially responsible habits while also ensuring their source of financial literacy is credible and not merely influential.