Press release from Business Wire India
Source: ArthaYantra
Wednesday, March 13, 2013 02:20 PM IST (08:50 AM GMT)
Editors: General: Consumer interest, People; Business: Banking & financial services, Business services, Financial Analyst, Information technology; Technology
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ArthaYantra's Personal Finance Survey: Indian Salaried Class Alarmingly Underprepared
Hyderabad, Andhra Pradesh, India, Wednesday, March 13, 2013 -- (Business Wire India) -- -- Personal Finance Readiness extremely low at just 6.75%
-- 83% Indian professionals cannot afford to retire at the age of 60
-- Emergency fund and Retirement planning are given least priority
-- Lack of access to quality financial advice a major reason behind bad financial decision making
ArthaYantra.com, India's first integrated online personal financial service company, has concluded an innovative research to understand and analyze the personal financial habits of the middle income professionals in India.
The survey was conducted among diversified pool of 2000+ salaried professionals working in different industries, with current base of ArthaYantra's clientele and 200+ Human Resource professionals across different industries and included -
-- Entry - level Professionals : Professionals with less than 6 years of work experience
-- Mid - level Professionals : Professionals with 6 -10 years of work experience
-- Senior - level Professionals : Professionals with more than 10 years of work experience.
This research by ArthaYantra is intended to analyze the current personal financial habits of the salaried employees and the effect of such habits on their financial well being in the future. The survey questionnaire for employees covers a wide range of personal finance aspects that include - spending patterns of individuals, the primary mode of payments, frequency of analyzing the expenditures and surplus, tax planning strategies, status of retirement plan and other relevant personal finance subjects.
Key Findings
Personal Finance Readiness
The personal finance readiness of salaried professionals defines the likelihood of meeting most of their goals in life. It is defined by:
-- How efficiently the cash flows are being tracked.
-- How well the investments are being planned.
-- How comfortable the retirement phase is going to be.
-- How efficiently one can handle any unforeseen/unfortunate events in life.
Based on the survey, only 2.43% professionals with a work experience of 1 - 5 years can be rated high on their personal finance readiness. Only 7.19% of the professionals with a work experience of 6 - 10 years can be rated high on their personal finance readiness. Only 11.48% of the the professionals with a work experience of 10+ years can be rated high on their personal finance readiness.
Overall only 6.75% of Indian Professionals are financially ready to face challenges in life.
Retirement Planning:
The survey reveals that out of the employees with work experience less than 5 years, only 9.29% have started investing in a retirement plan other than Provident Fund or other such mandatory retirement related options provided by their organizations. Out of employees with a work experience of 6 - 10 years, only 19.23% have planned for their retirement and 29.63% of the employees with work experience over 10 years started investing for their retirement.
Based on the current personal financial habits of the employees surveyed, only 18.64% can afford to retire at the age of 60. This also means that the probability of extending the retirement age is higher for the remaining employees owing to lack of enough retirement corpuses. Even for people who can retire at 60, quality of retirement would be sub-par.
Emergency Fund
The scientific practice of Personal Finance advices an emergency fund which accounts for 3-6 months of expenses. Managing an effective emergency fund stands out as one of major risk management techniques. As per the Survey, 14.22% of professionals with a work experience of less than 5 years have an emergency fund which can account for the expenses worth 3 or more than 3 months. 44.23 % of employees with a work experience of 6- 10 years have and emergency fund that is more than their 3 months expenses. Between the age of 30 to 45 years, an individual faces an average of 3 emergencies and possibility if him/her undergoing financial distress is very high.
The result further states the fact that practice of saving money for emergencies does not exist among a large portion of the population. The current state of the employees would push them to encash their existing investments or assets in order to fund their emergencies.
Budgeting Frequency
The critical step of saving process is identifying the spending patterns. Once the spending patterns are identified, it is easy to determine those areas which need attention. Cutting down spending on such areas and getting the average monthly spending under permissible levels is in fact one of the most important aspects of money management.
Based on the survey conducted, only 26.26% of the employees are maintaining a healthy frequent track of all their expenses. 10.61 % of the employees review their expenses frequently. The majority of employees (42.93%) review their expenses occasionally where 20.20% of the employees review them rarely.
This signifies the fact that most of them generally do not keep a track of where we spend and how much we spend.
Sources of Financial Advice
Most of the investment mistakes made can be attributed to lack of proper research before investing. 35.40% of the employees said they are making their investments based on the advice of their friend or colleagues. 30.97% of the employees said that they make their investment decisions based on the feedback they get from their family members. 13.27% of the employees said they rely on their self research for making any investment decisions. 15.93% of the employees said that their investments are made on the basis of the advice given by or products sold by their neighborhood agents. Only 4.42% of the employees said they seek advice from an expert before making an investment.
Lack of access to quality advice is the prime reason behind individuals making few bad financial decisions.
Tax planning
One of the major components of tax savings in India is the investments which account for section 80 C. Though these investments bear the advantage of decreasing tax liability, the flip side comes with the kind of tax saving instruments bought.
The other important aspect of making tax saving investments is the time during which the investments are made. Based on the survey conducted, 28.85% of the employees who have 1 - 5 years of experience do not plan to save money through proper tax saving investments. 28.85% plan their taxes during the months of January to March. 18.27 % of them make tax saving investments during the months of October to December. 14.42% make their investments during April to June where as 9.62% make their investments during July to September.
When it comes to the professionals with an experience of 6 - 10 years, 7.14% of them do not plan their taxes. 18.57% of them plan their taxes during the months of January to March. 25.71 % of them make tax saving investments during the months of October to December. 30% make their investments during April to June where as 18.57% make their investments during July to September.
When it comes to the professionals with an experience of 10+ years, 12.50% of them do not plan their taxes. 29.17% of them plan their taxes during the months of January to March. 20.83 % of them make tax saving investments during the months of October to December. 25% make their investments during April to June where as 12.5% make their investments during July to September.
Among the employees surveyed, most of them either do not take the advantage of the tax savings under 80C or tend to invest more than the permissible limit.
Most common goals
During the survey, the employees were asked to rank the goals based on their priority. Common family aspirations like buying a home, buying a car are rated on priority followed by common family needs like child birth, child education and child marriage.
Creation of emergency fund and retirement fund were given the least priority.
Major tax saving Investments
Based on the survey, 77.46% of the employees surveyed stated that Insurance is their primary choice as a 80C investment vehicle. When drilled down further, 95.86% of the professionals who prefer insurance as their tax saving investment receive their financial advice from family or neighborhood friends. 6.86% of the employees invest in Equity Linked Saving Schemes. This eventually depicts the equity aversion of many of the professionals.
7.95% of employees invest in PPF or EPF in order to avail a tax deduction. 76.85% of the employees who invest in PPF or EPF stated that they receive their financial advice from their colleagues. 3.45% of employees invest in NSC and 4.28% of the employees choose fixed deposits in order to avail a tax deduction. 83.26% of employees who invest in NSC get their advice from Family. It is tricky to determine the investment product suitable for the individual without assessing their current financial situation and future goals.
As per the survey results with the employees favoring insurance over other investments, it can be said that the strategy behind their tax saving investments should be revisited and fine tuned.
Conclusion
The findings of the research report signify the fact that most employees are making financial decisions in isolations. The current state of the employees is not adequately addressing the needs of the future. It is important that they look beyond the short term goals and start preparing themselves for the objectives for the future. The result of current personal finance habits of the salaried employees could be catastrophic and it is highly important to start giving attention to personal finance when time is on their side.
DOWNLOAD Full Report : http://www.arthayantra.com/researchreports.html
About ArthaYantra
ArthaYantra is a young and innovative company started by a group of alumni of the Indian School of Business (ISB) Hyderabad. It provides integrated personal finance services using its unique proprietary framework, Personal Financial Lifecycle Management (PFLM)TM, which helps clients achieve their financial goals. ArthaYantra has launched a revolutionary and free personal finance platform - Arthos to allow professionals to plan, execute and manage their personal finance online. ArthaYantra's vision is to provide independent, high quality, customized financial planning solutions and their efficient execution to individuals. They employ proprietary financial models and enable investments through well balanced passive investment strategies. ArthaYantra's clientele includes individuals from India, US, Europe and Middle East. Visit www.arthayantra.com
Specialities: #employeebenefit #personalfinance #personalfinancesoftware #salary #middleclass #taxplanning #insurance #mutualfunds #80c #financialadvice #investmentplanning #financialadvisor
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CONSUMER, PEOPLE, BANKING, BUSINESS SERVICES, Financial Analyst, IT, TECHNOLOGY
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