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World Savings Day: A reality check on household savings
Source: Live Mint
As World Savings Day is celebrated, a pressing concern comes to the forefront—household savings rates in India are declining amid tough economic realities. According to the National Account Statistics 2024 from the Ministry of Statistics and Programme Implementation (MoSPI), net household savings dropped a massive ₹9 trillion over the three years leading to FY23, now standing at ₹14.16 trillion. Consequently, the household savings ratio fell from 22.7% of GDP in FY21 to 18.4% in FY23.
Read this | Mint Explainer: What plummeting household savings mean for the economy
Safeguarding individual wealth requires proactive measures—starting with building emergency funds, diversifying investments, and managing personal debt effectively.
Rising costs and easy credit impact financial security
India’s annual inflation rate surged to 5.49% in September from 3.65% the previous month, based on Consumer Price Index (CPI). Rising inflation, coupled with increased credit accessibility, has redefined personal financial habits.
With easy access to loans and credit cards, many individuals assume savings are unnecessary. As of March 2023, unsecured personal loans grew more than fourfold to ₹13.32 trillion, compared to ₹4.26 trillion in March 2017, according to the CareEdge Rating Report. This false sense of security often leads to overspending and a cycle of debt, shifting focus away from the importance of saving for future needs.
here | Indian banks are staring at worrisome savings and investment trends
Why savings are essential for financial stability
Savings act as a financial cushion, providing resilience during unexpected economic downturns or emergencies. Without adequate savings, individuals are forced to rely on loans, incurring high costs to cover unforeseen expenses.
For many lower-middle-class and middle-class families, limited discretionary spending options mean they prioritize essential needs over wants. In such contexts, saving becomes crucial—serving as a buffer against economic shocks and ensuring long-term financial stability.
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Small steps towards investments
Starting small with investments not only builds a safety net for emergencies but also opens opportunities to grow wealth. Smart investments offer the potential for higher returns, fostering confidence and encouraging better financial decisions. Developing even a basic understanding of markets and investments can lead individuals toward sustainable financial security and growth.
Financial literacy drives a savings culture
Addressing financial challenges in India requires tackling financial illiteracy. Many people still view savings and investments as secondary rather than essential tools for wealth-building. Promoting a proactive approach to financial planning can empower individuals to avoid economic vulnerabilities and seize opportunities in a dynamic market.
Various platforms have made it easier to learn about saving and investing. These apps not only track savings against personal goals but also offer courses and tutorials that simplify complex financial concepts. By fostering these supportive learning environments, they enhance users’ financial confidence and knowledge, setting them on a path to start saving and investing.
A call to action
World Savings Day highlights the importance of financial education alongside saving and investing. Understanding these concepts empowers individuals to navigate personal finance challenges.
Also read | How financial planning helped this Mumbai family
Financial literacy builds resilience and promotes responsible investing—critical for economic growth. Taking the first step toward financial stability ensures a sustainable future for individuals and the broader economy.
Ajay Lakhotia is founder and CEO at StockGro.
