financial planning
14 The Economic Times Wealth September 23-29, 2019
Why we all must save a little
The only way to deal with uncertanities of the future is to save persistently, says Uma Shashikant.
UMA SHASHIK ANT
IS CHAIRPER SON, CENTRE
FOR INVES TMENT
EDUC ATION AND LE ARNING
The distaste for
savings is to my
mind the core
problem. There
isn’t any other
easy solution to an
uncertain future. Not
the stringent saving
that kills, or the
erratic saving that is
indisciplined, but a
small and persistent
saving as a habit.
L
ast week, the hashtag
#MillennialRetirementPlans was
trending on Twitter. The tweets
offered humour, pragmatism and a
range of emotions. It was interest-
ing to see the need to break away from norms
of the earlier generations. The young were
persistent in pointing out that what worked
earlier won’t work now. Maybe, maybe not.
Should we be in charge of our retirement
or let the government provide retirement
benefits and social security? This debate is
old, and we have lived through the cycles of
one school dominating the other. The baby
boomers (born 1946-64) broke away from
handouts and expected their governments to
only provide the framework for retirement
security. The focus moved from benefit to
contribution. People began to save early,
invest without touching the corpus, and al-
lowed it to grow and fund their retirement.
Generation X (born 1965-1980) stepped into
their work lives during the period of boom
and bust, making money or losing jobs into
their adulthood. They were the consumerist
generation. They got themselves into debt
for homes and used credit cards happily, and
lived with the confidence of finding a job to
do through their lives. They worried when
conversations turned to retirement, felt
guilty about not doing enough, but hoped to
begin to save sooner than later. They wished
the government offered some social security.
The millennials (born 1981-96) are not sure
what the long term holds. Many joke about
not living long enough, or spending half
their lives finding a job and the other half
IMAGES BAZAAR
paying off loans. They disapprove of the con-
servative approach of baby boomers, though
many of them think they may fall back on
inheritance or their parents’ incomes if all
else fails. The primary marker for the mil-
lennials are that they are not in the formal
workforce by choice; they like the gig econ-
omy instead. Working wherever their skill
is sought, or starting small businesses that
may or may not work, is how their work life
pans out. They increasingly don’t own homes
and cars, for they find loans burdensome.
They blame the older generations for putting
them through expensive but useless educa-
tion and for advocating savings and owning
assets, when their income itself isn’t stable.
What would an educated generation that
works hard, but finds the amount of uncer-
tainty they have to deal with is too high do?
Retirement would be the last thing on their
minds. The traditional answer to an uncer-
tain future was savings. The baby boomers
denied themselves the luxuries to save for
the future. They saw the savings as their in-
surance against unexpected events.
The millennials do not have that world
view. They do not divide their work lives
into compartments. The idea that you would
earn, save and retire seems not just staid, but
difficult to pull off in their times. Their view
of their finances revolves around the balance
between spending and earning. Since they
are currently struggling to get past this basic
equation of comfort, their ability to have a
long term view is limited. Many remain pes-
simistic about their future, their longevity,
their retirement and their wealth.
The inequality in income rankles many
who posted on Twitter. They find earlier
generations have not only become very
rich, but have also eliminated many tra-
ditional jobs that paid a steady income.
They do not see themselves necessarily as
entitled, but blame the earlier generation
for the excesses and the lack of jobs across
the spectrum. The gig economy, where
every paying job is a risky contract, is not
their making, they argue. They see it as a
response to the excesses of the capitalist
and consumerist economic models. The
leaning of a significant number of millen-
nials to somewhat socialistic models stems
from their view that this inequality needs
serious correction.
Health is a big concern, expressed in vari-
ous ways in which it affects the millennials’
lives. They worry about the lack of ethical
selling in the food industry; they see them-
selves as being afflicted by lifestyle dis-
eases, as they keep long hours and eat errati-
cally; they find themselves short of money
and time to address any health issues that
may arise; and they worry about falling ill
and losing their jobs. The highest level of
pessimism is about aging and being afflict-
ed with some disease that needs money and
prolonged care. They don’t see themselves
prepared, nor do they see solutions.
The distaste for savings is to my mind the
core problem. There isn’t any other easy so-
lution to an uncertain future. Not the strin-
gent saving that kills, or the erratic saving
that is indisciplined, but a small and per-
sistent saving as a habit. The modern times
are not easy, and the millennials’ stories
about uncertain jobs are real. How would
you solve a problem you do not control?
It is the nature of economic cycles to not
reveal the trends until we are well into
it. The conservative baby boomers would
not have imagined themselves on top of
a wealth pile. If they did, they would not
have been so frugal. Gen X would not have
taken loans, spends and job changes with
abandon, if they knew their jobs will get
redundant. The confused milliennials do
not know how their creative solutions to
uncertainty, their determination to set the
wrong right, will make a better world for
everyone. While we argue for what we see
as effects and consequences, we discount
what we do in action to enable change.
That one ground rules remain unchal-
lenged through this churn—the precious
merit of our little savings that have been
invested to protect us when in trouble.
The millennials need not kill themselves
to save; but holding back on one spend a
day will go a long way. Put aside the cost of
one meal a day, you will be surprised how
it grows with time. Old fashioned, but im-
mensely doable.
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