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SPENDING & SAVING HABITS OF YOUTH IN THE CITY OF INDORE

Dr.RekhaAttri,
Associate Professor, Core Business School, Indore, India, rekha.attri@gmail.com

ABSTRACT

India is a developing country where the middle-class has relatively grown monetarily stronger and with the increase
in the spending power of the adults, even the young have become free-hand spenders and spendthrifts in some
cases.This paper addresses the question of why, where and how the youth spend? The youth referred to here are of
the age group 14-30 years. With the rocketing economy, the buying trends are also changing. The age group of 15-
30 years is that part of the society which is immortalized in advertisements. The west depicts this youth as
financially and emotionally free, but in India the case is not the same. Despite being financially dependent on the
parents till about an age of 25-26 years, there is a radical difference observed in the spending behaviour of the
youth of our country. This paper is an attempt to study the spending and saving habits of the youth in the city of
Indore.

INTRODUCTION

With the revolution in the retail sector in India and being financially dependent on the parents till about
advent of mall culture, the spending and saving habits an age of 25-26 years, there is a radical difference
of the youth have changed over the years. An over observed in the spending behaviour of the youth of
exposure to marketing communication activities of our country.
the companies, the youth has turned to be more brand
conscious and also spend a considerable amount of LITERATURE REVIEW
their income on entertainment and gadgets. With the
With the rocketing economy, the buying trends are
increase in spending power of the adults, even the
also changing. The mentioned age group, have
young have become free-hand spenders and
entertainment, leisure, food, clothing, etc. as their
spendthrifts in some cases.This paper addresses the
priorities in spending and this generation is willing to
question of why, where and how the youth spend?
spend on everything from mobile phones to sneakers
The youth referred to here are of the age group 15-30
to french fries (Schuman, 2006).Over 250 British
years. The age group of 15-30 years is that part of the
children and adolescents completed a questionnaire
society which is immortalized in advertisements. The
on their sources of personal income (pocket
west depicts this youth as financially and emotionally
money/allowance, part-time job, gifts), as well as
free, but in India the case is not the same.Despite
how much they had saved, where it was stored, and
for what purpose it was intended. The participants

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also responded to various attitude statements about
money and the economic situation in general
(Furnham, 1999).Like no other generation, today's
youth are growing up in a culture of debt facilitated
by expensive lifestyles and easy credit (Dugas, 2001).
Teen spending reached $175 billion in 2003 through
parental allowances and youth's personal job earnings
(Teenage Research Unlimited 2003). With access to
this amount of wealth, youth are the target of
marketing campaigns and credit companies.
According to Synovate (2005) the 2004 credit card
mailings increased 5.2 billion, superseding the 2001
record in U.S. In the west the credit card companies
are bombarding college campuses where students are
enticed with pre-approved credit to avoid using their
limited cash supply (Grable and Joo 1999). A survey
on the spending habits of young people in
Guangzhou, Hong Kong and Macau found that Hong
Kong youths have the most pocket money but spend
it mostly on entertainment, clothes and
accessories.Hong Kong youths would borrow from
friends or take up part-time work, in order to earn
enough money to spend.The survey concluded that
the more pocket money an average Hong Kong youth
is given; the chances are that the proportion spent on
enjoyment will be greater.In addition, nearly 20% of
Hong Kong youths say they “spend all they have”.
When they run out of pocket money, they either
borrow from friends or take up part-time work.(MSE,
2004).According to new research from Euro monitor
International, University graduates are the key
emerging economic force within China's "youth
generation", which includes all those aged between 0
and 29 years old. Marius Dundulis, global market
research manager at Euro monitor International,
commented, “This segment of the population also
exerts influence beyond its own buying power, as
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many graduates continue to live at home after
University. While they remain there, they have the
ability to persuade their parents to buy new brands
and products” (Market Trends
Global,2004).According to Young Asian survey by
Synovate, today's young Asian is a multi-tasking,
interactive, digital-driven consumer. Conducted in
conjunction with MSN, MTV and Yahoo!, Young
Asians surveyed over 7,000 respondents aged 8 to 24
across Hong Kong, Singapore, Taiwan, Malaysia,
Thailand, Indonesia, Philippines and India. The study
revealed the hearts and minds of Asia's connected
youth, exposing their favourite brands, spending
habits, dreams and aspirations (Change Agent,
2005).According to a survey conducted by Keycorp
(2005), 55% of the people surveyed said that they
were decent savers. The survey also found that 49%
respondents said that cable T.V and satellite
television were essential for their lifestyle ,46% need
cell phones,44% high speed internet access,32%
spent on entertainment, movies & dinning (Keycorp,
2005).Marketing director of Levi Strauss, India said
in 2005 that they have tripled their sales in Bangalore
city in the last three years. According to him this was
largely due to the effect of disposable income coming
into the hands of the 18-22 age group employed in
BPO jobs. VishuRamachandran, regional head
(consumer banking), Standard Chartered Bank, India,
estimates that India adds around 3 million young
earners in the age group 20-24 annually. These first-
time earners account for 7-8% of its credit card base
of 1.4 million - a figure that is expected to more than
double in the next few years. (Joshi, 2005)According
to Kamath (2006) the age group of 17-25 year spent
more on apparel and was becoming more brand
consciousness because of the easy availability of
information on just a click away. In 2006, Youth
9

believed in “live for today” attitude rather than a
mindset of “Saving for the future”. Contribution of
the youth segment to total brand sales was as high as
60 percent. (Kamath, 2006).Indian youth is showing
a preference for ready-made apparel with a massive
75% hike in such purchases. Another major change in
consumer behaviour was found in the way India
connects. Telephone expenditure, per person per
month had increased by a whopping 515% since
1999-2000 in rural areas and by 230% in urban areas.
The deep inroads made by the mobile revolution was
visible in the proportion of households incurring
expenditure on telephone going up from 5% to 32%
in rural areas and from 25% to 63% in urban areas.
Expenditure on education has gone up from 45% to
57% in urban India and from 29% to 44% in rural
India while expenses on healthcare have also gone up
substantially. All of these are clear indicators of
change culture and values in modern India (George,
2007).According to the NSSO survey, Indians
seemed to be spending more on trendy clothes,
mobiles and cars. Major change has been seen in
ready-made apparel showing a massive growth as
75% of Indians purchase ready-made garments.
Increment in the demand of cars and motor bikes had
also seen substantial increase over 11 years. About
4.6% urban households owned motor cars in 2004–05
compared to 1.2% in 1993-94 (The Times of India,
2007). According Global youth panel, a survey was
conducted on spending habits of youth all over the
world and the age group was 14 – 29 years. Their
main aim to conduct this survey was to find out the
factors influencing youth decision-making process.
The results pointed that 43% respondentsliked to
purchase only after carrying out online research about
the product, 40% were influenced by family or
friends and 17% were influenced by TV/magazine
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advertisements, product design or just make ‘on-a-
whim’ purchase decisions. They also came up with
three major areas of spending in various countries. In
Singapore and South Korea, youth spends more on
Food (45% and 30% respectively), Clothing (27%
and 25% respectively) and Entertainment (14% and
15% respectively). In UK and Amsterdam youth
mostly liked to spend on going out i.e. 52% and 32%
respectively and in Hong Kong and US, youth spent
mostly on Clothing i.e. 40% and 52% respectively
(Mobile Behavior, 2008).In 2009 when recession hit
all over the world, the researchers were keen to know
about the spending habits and reactions of teens
towards the recession. 75% of teens behaved in the
same way and spent in the same way as they were
spending in the previous year.The research results of
seven countriesincluding India showed that, teens are
basically focusing on saving for three things i.e
Clothes (57%), College (54%) and a Car
(38%)(Meredith, 2009).It was also pointed out that
the young generation rarely practiced basic financial
skills, such as budgeting, developing a regular
savings plan or planning for long term requirements
(Pillaiet.al.,2010).
RESEARCH OBJECTIVE
From the review of the available literature on the
spending and saving habits of the youth a gap was
identified in terms of limited research carried out to
study the spending and saving habits of youth with
special reference to the city of Indore. Hence the
objective of this research is to:
 Study the segment wise spending habits of
the youth
 Modes of saving practiced by the youth of
today
10
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 Influence of demographic variables, peer questionnaire to get a complete understanding of the

group and media in the purchase habits of
the youth
 Study the gender wise spending and saving
habits of the youth.
RESEARCH METHODOLOGY
The research was conducted in the city of Indore with
a representative population size of 275 respondents
falling in the age bracket of 15-30 years. The
sampling method followed was convenience
sampling and care was taken to have an almost equal
representation of both the genders. The respondents
were approached in schools, colleges, malls and
multiplexes. A pilot test was conducted on 15
respondents to get insights into the problem areas
which might be faced by the respondents while
answering the questionnaire. Both open ended as well
as close ended questions were included in the
topic under study.
DATA ANALYSIS AND INTERPRETATION
As can be seen from table 1, 48% of the respondents
in the age group of 15-19 years claimed that they had
savings account while 22.9% of the respondents in
the age group of 20-24 years said that they used
savings account for money either transferred by their
parents for their education purpose in case they are
studying at a different location from their parental
home or for depositing the money received as a
pocket money from their parents. 81.5% of the youth
in the age group of 25-29 years extensively used the
saving accounts of various banks.
60.2% of the respondents in the age group of 20-24
years had fixed deposits done either by them or by
their parents in their name. 88.2% of the respondents
in the age group of 25-29 years had made
investments in some mutual funds while 11.9% of the
respondents loved investing in share market.

Table1: Age wise use of various savingoptions

Investment options 15-19 years 20-24 years 25-29 years

(%) (%) (%)

Savings Account 48 22.9 81.5

Fixed Deposits 4 60.2 17

Mutual Funds 0.2 1.8 88.2

Share Market 0 12 11.9

The respondents were asked through the influencers whose inputs or guidance they normally
questionnaire to tick against the top three purchase resort to while purchasing a product or service. As

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can be seen from table number 2, 24% of the youth
below 15 years are influenced by family members
while making their purchase decisions. Influence of
family is much lower in case of other age groups.
25% of the respondents in the age group of 15-19
years are influenced by their friends and peer group
while purchasing products or services. Again 19% of
the respondents below the age of 15 years get
influenced by their peers while making purchase
decisions. A very less percentage of the youth did
online shopping. The effect of television, magazines
and advertisements was higher for the age group
below 15 years and those in the age bracket of 25-29
years. 49% of the respondents in the age group of 25-
29 years relied on examining the product features
while making purchase decisions and 60% of the
respondents in the same age group made independent
decisions while purchasing products or services.

Table 2: Purchase Influencers for purchase decisions made by youth

Purchase Influencer Below 15years 15-19 years 20-24 years 25-29 years
(%) (%) (%) (%)

Family 24 8 2 5

Friends 19 25 5 9

Online Purchase 0 5 2 9

TV/Magazine 12 5 2 18

Advertisement 14 8 10 15

Product/Service Features 10 30 29 49

Independent Decision 5 30 50 60

Table 3A depicts the gender wise spending habit of respondent agreed spending this big an amount per
the youth. Table 3A shows that just 5.3% of the male week on the same. The male respondents spent a
respondents spent less than or equal to 300 rupees on higher amount per week as can also be seen from the
entertainment and gadget while the percentage of 28.4% male respondents stating that they spent
female respondents spending this amount was much between Rs. 901-1200/- per week on gadgets,
higher i.e.18.2%. Also 11.6% of the male entertainment or eating out. This was considerably
respondents spent more than Rs. 1200/- on lower in case of female respondents where only 5.5%
entertainment, gadgets etc. while no female of the female respondents stated that they spend
between Rs. 901-1200/- on entertainment.

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Table 3A: Gender wise spending in Rupees per week

Gender Rs.0-300 Rs.301-600 Rs.601-900 Rs.901-1200 Above Rs.1200

(%) (%) (%) (%) (%)
Male 5.3 18.4 36.3 28.4 11.6

Female 18.2 43.6 32.7 5.5 0

Table 3B highlights the gender wise spending options gadgets and personal needs, the female respondents
of the youth. Where on one hand the male spent the highest on personal grooming, followed by
respondents spent the highest on entertainment spending on personal needs and thereafter
followed by eating out and thereafter investing on entertainment.

Table 3B: Gender wise spending options

Gender Eating Out Gadgets Personal Personal Entertainment

(%) (%) needs Grooming (%)
(%) (%)
Male 25.3 18.4 16.3 8.4 31.6

Female 18.2 13.6 22.7 25.5 20.0

Table 4 depicts the gender wise survival period of the could survive for 30 and 40 days with their monthly
youth with their pocket money. As can be seen in the allotted pocket money as compared to the male
table a higher percentage of the female respondents respondents where a higher percentage of
respondents (45.3%) could only survive with their
pocket money for 25 days..

Table 4: Gender wise survival of Youth with the pocket money/income

Gender 20 days 25 days 30 days 40 days

(%) (%) (%) (%)

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Male 8.4 45.3 37.9 8.4

Female 10.9 24.5 49.1 15.5

CONCLUSION Change Agent. (2005). The lives of Asian Youth.

Retrieved from
This research clearly depicts the change in the
http://www.synovate.com/changeagent/index.php/site
spending and saving habits of the youth of today.
/full_story/the_lives_of_asian_youth, Accessed on:
There is a huge influence of peer group in the youth
17 Sep 2011.
below nineteen years while making purchase
decisions. This is more so in the smaller age group
Dugas, C. (2001). Debt Smothers Young Americans.
i.e. for respondents below 15 years and those in the
Retrieved from
age group of 15-19 years. With the maturity of the
http://www.usatoday.com/news/nation/2001/02/2001
respondents this influence of friends and family
-02-12-young-debt.htm, Accessed on: 12 Sep 2011.
decreases and he/she relies more on evaluating
product/ service features and characteristics and
Financial Prudence Among Youth. (2010). Spending
hence makes an independent decision. A difference
Habits of Youth. Retrieved from
was also observed on the gender wise purchase
http://docs.google.com/viewer?a=v&q=cache:1ZOdI
behavior and their saving habits. The youth also does
B1a-YEJ:mpra.ub.uni
not believe much in saving and believes in spending
muenchen.de/22450/1/Financial_Prudence_Youth.pd
more on entertainment, gadgets, eating out and
f+spending+habits+of+youth
personal grooming.

SCOPE FOR FUTURE RESEARCH
There is a huge scope of future research in this area
of study. A research can be carried out to compare
the spending and saving habits of youth in metro
cities versus tier II cities. Also a study can be carried
out on how youth who have just got employed have
changed their spending and saving habits. A gender
wise spending and saving habits of middle aged
people can also serve as an interesting topic of study
for the researchers.
REFRENCE LIST
Furnham, A. (1999). The saving and spending habits
of young people. Journal of Economic Psychology,
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George, S. (2007). Changing Spending habits of
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spending-habits-of-indians/, Accessed on: 17 Sep
2011.
Grable, J. & Joo, So-Hyun. (1999). Survey With
College Students Reveals Needs For Curriculums to
Include Credit Education. Journal of Family and
Consumer Sciences, 91(4).

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Joshi, A. (2005). Youth Consumerism, Retrieved MSE. (2004). Young people should cultivate attitude
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