Friday, March 5, 2010

Savings across the generations

Savings patterns have changed tremendously over a period of time. I still hear stories from my older generation how they started saving and investing as soon as they started jobs, a pattern that I find missing in today's generation, including me.

One senior member of my family proudly preaches how he bought his first investment, a small shop, within 2 years of his job. And over the period of time when he retired, he owned four residential and commercial properties.

I have also heard numerous stories from one other family member that how they managed to build two houses and educate and marry all of their three kids in single-income family.

Of course both of them will accept it that while they were fulfilling their duties and building wealth, they never owned fancy things. Cars used to be rare commodity at that time. Kids were not studying in fancier schools. Family members were not wearing fancy most clothes and no they might not take a vacation every year. Theirs attitude is what I’ll say "Saving's First" attitude.

Cut to generation X. As soon as we get the job, we want to buy a new car. By the time car loan is half paid, lucky one's will get married. After marriage comes luxurious travelling for next few years. After two-three years, planning for future starts, which includes owning a house and having a family. Now if one starts working at the age of 24, it's at age of 29-30 when one is thinking of buying a house. That home loan might take 5-10 years for repayment or even more depending on how diligently you want to finish it ASAP. By that time you are near or in your Forties. At that point, concerns for retirement and kid’s future may arise. This is the stage in financial life where I have personally seen most of people regretting. I still remember when my manager who was in her early forties once commented to me that "You are quite wise and smart to start investing when I am still in my mid-twenties. I used to splurge all my money on eating-out when I was your age." This attitude is what I'll say "Spending's First" attitude.

I am not trying to advocate any kind of lifestyle here. I am absolutely OK with both kinds of lifestyles. But I have a suggestion to all the youths who are starting on their careers. Having a decent lifestyle is absolutely acceptable. Go and buy a car, buy a new Cell Phone and new PS3. But try to save some portion of your salary every month. Saving 10% of your salary will not hurt your lifestyle much, but can save you a heart attack in your forties.

What about you? What kind of lifestyle do you have? "Saving's first" or "Spending's First" attitude?


  1. I think I am "Saving's First" Personality but I am such a careless about spending or other things in managing finances (like not maintaining minimum balances) that my family/friends say whatever I am saving, I am paying back in fine and charges... :(
    I have set all my SIPs in first week of the month, so that my savings are done just after I get my pay cheque and then I pay for other things.

  2. I am somewhere in between really. I definitely used to be spend first in my early days, but trying to move away from that now.