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Why young Indians won’t be able to retire

Lack of savings, love for credit and impeding employment crisis will make their retirement near impossible

By Narayan Krishnamurthy

These days the kind of mails that frequently hit the mailbox are from youngsters – first time employees. They mostly have the same tone – I earn well, but by end of the month there is so little to save that I have no savings. They have some loan or the other running and the concept of saving for retirement just does not exist. Yes, planning and saving for retirement is a challenge for almost everyone these days. The challenge for the youngsters is compounded by their belief of infallibility that drives them to spend over saving. The concept of investing is lost in the milieu.

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The financial independence related articles on the occasion of Independence Day were mostly on what to do, or how some people had worked towards financial independence. But the objectivity was lost, because what can you tell someone who does not have the desire to save, forget invest the savings. Yes, on a thin salary one has to pay for housing, transportation, basic living expenses and then the numerous gadgets and gizmos that one lands up buying on loans that take away whatever is possible to otherwise save. There is also the tendency to procrastinate over starting when they have more money.

I am not getting into the details of the metro-dwelling urban poor, where many of these 20-somethings are actually spending a great deal of money by pretending to keep up a lifestyle, which they cannot afford. The outcome is paycheque-to-paycheque survival and in many cases, salary advance loans which puts them in a spot much worse than those battling for survival on a hospital ventilator. Once you get used to living this way, the chances of getting out of it are rather bleak.

Entrepreneurial Nature

The traditional employment could be going just the way the landline phone made way for the Smartphone era. Several youngsters have been star struck by the start-up culture and are plunging into joining one or aspiring to start one of their own to make it big. There is nothing wrong in venturing on one’s own; however, the failure rates of start-ups are a lot higher, leaving many aspiring entrepreneurs staring at failure and financial gloom. At the same time, there are some youngsters who are looking at an extra job, one that would supplement their primary employment. 

They believe that the side job would be useful to meet their financial goals. This approach though commendable, has its share of perils, with the biggest challenge being to find such jobs. Moreover, many youngsters wish to have a shorter working life – they want to retire early. This concept of early retirement is not to completely stay unemployed, but to work as and when they need to. As much as this concept sounds promising, the challenge one faces these days is the lack of jobs and a clear career path for one to progress on the job.

Then, there is the challenge of poor laws or lack of it governing employment – the hire and fire syndrome leaves little room for one to feel safe with a job. If you include the fast changing workplace requirements, lack of skilling employees in a timely manner, a greater role for technology and artificial intelligence in job roles – you are actually staring at a gloomy future. The generation that is touted to live much longer, thanks to advancement in healthcare, have not considered the adverse effects of living long. But, the poor level of financial literacy and one’s own inertia to learn about financial prudence leaves these youngsters in an undesirable and wasted situation.

What will the future be like?

Today’s youngsters may face the fate of the Ambassador Car, which lost its relevance and appeal the moment there was choice and aggressive push by new entrants. Instead of adopting itself to changing circumstances, the company felt it could do with lesser number of cars each year, to one fine day find itself unviable. End result – the Ambassador was talked about with pride even in its last phase, to now being relegated to history.

I am from a generation where schools started to impart computer courses as that was the next big challenge that was staring at us. I wish someone has the same vision to take up teaching about money in school and colleges with the focus on people to realise the importance of savings and investments. Without wanting to sound pessimistic – I am not very confident if imparting knowledge about money and personal finance is a skill that any government is keen to push for.

Prime Minister Narendra Modi should have included financial illiteracy-Quit India in his ‘Sankalp Se Siddhi’ campaign, as not being financially aware will someday be viewed in the same vein as poverty, terrorism and dirt. Unless something on financial literacy, awareness and education happens in such a scale, the chances of young Indians being able to retire will remain a discussion point, with no solution in sight. Let us take a pledge to educate youngsters to understand the importance of savings and investments for their own secure financial future.

If you have ideas and suggestions on how to teach young Indians about money management; write to me at nk@outlookindia.com. Your suggestions would be valuable and help putting in place a module to reach out to young Indians on the importance of saving today, for them to realise retirement, as they perceive is impossible for most of them. 

 

 

nk@outlookindia.com

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