The changing reasons why we save money

Till sometime early this year, whichever way Bengaluru-based Uma Madan, 69, looked, she was in a happy space. Married and a mother of three children, all well-educated and settled in their own homes and lives, Uma and her husband G. Madankumar, 73 and a retired engineer, lived in a sprawling 1,700 sq ft apartment in Lower Palace Orchards, a posh area in Bengaluru. Being a counselor for a non-profit firm and a teacher to children with special needs with another non-profit, her days were filled to the brim. She says she used to get-and still does-at least two phone calls a day, looking for advice. In her spare time, she would practice her singing, make chocolates, and help as a volunteer with the Art of Living social group. Life was good.

And then the couple rocked the boat.
In January 2017, she sold her home and moved to a rental house. Uma says, since she and her husband were ageing, maintaining their old home was "becoming expensive with regards to maintenance and security". They wanted to move to a flat (their own though, not rented) when her son advised to move into a rented flat, instead of buying one. He put them in touch with PeakAlpha Investment Services Pvt. Ltd, a Bengaluru-based investment advisory firm, which reaffirmed to Uma and Madankumar that a rental accommodation would be a better idea than owning a flat.

At an age when most people want a more secure roof over their head, Uma and her husband moved to a flat that they don't own. Their path also reflects a slowly, but surely, growing trend of how individuals are going beyond the usual financial goals of food, clothing and shelter; and planning for goals that were taboo, up until just 10 years or so ago.

New perspective...
Several financial planners told us said that although investors' basic instincts remain the same, the perspective seems to be changing. It's not uncommon for people these days, for instance, to plan for their own selves first, rather than their children. "These are people in their 40s who say, 'let the kids do what they want, we will provide for them to a point and then, they need to fend for themselves," said Srikanth Bhagavat, managing director, Hexagon Capital Advisors Pvt. Ltd. It is a bit like what you are told during the safety drill in a flight: put on your oxygen mask, before you assist others-even your own kids. Bhagavat says that when his firm quizzes a new customer, sometimes people's deepest desires come out slowly, partly because they never really knew they thought that they had the money to fulfil them.

Surya Bhatia, managing director of Asset Managers, said that a growing trend among his customers is to not plan for their kids' marriage. "Whatever money they have, they want to put it for their kids' education...also higher education abroad. They don't look at marriage as a goal. It's a big shift in parents' mindset."

Then, there are those like Bindhu Unny, 44, and her husband Unny Radhakrishnan, 46, a Mumbai-based couple. From the time they met over the internet on an online matrimony website in the year 2000, they have chosen to walk a different path. There was more. The couple chose to not have kids. Keen to live life on their terms, the couple dabbled in unconventional jobs or companies; Unny worked for a company between 1997 and 2004 that did so badly that he did not get a salary between 2001 and 2003 but continued just because it was an idealistic firm. After Unny changed his job early 2004, the couple moved to Mumbai later that year, and their fortunes changed slowly. In 2011, they went to Suresh Sadagopan, founder, Ladder7 Financial Advisories, to get help in managing their finances better. By that time, the couple's finances had also stabilized.

Having children, though, was not and still isn't on the agenda. Why? "We get more time to ourselves. We get time to travel. And since Unny has quit his job (he is serving his notice period currently) to join a non-profit firm or work in the development sector, not having kids gives us more flexibility to plan our finances and do things we would have never imagined. Else, this is the age when our kids would have gone to college and we'd have had to fund it," said Bindhu. Isn't that a bit selfish? "Selfishness is okay, self-centeredness is not. It's not like we don't like kids; we have a very healthy relationship with our nephews and nieces. But we had decided even before our marriage to not have kids. Most of the time, parents expect their children to fulfil their dreams. We prefer to fulfil our dreams on our own," said Bindhu.

...from new advisers
But that's just one side of the story. The emergence of financial planners has also contributed to the change in mindset. For instance, how much should you plan for your child's education? Sadagopan told us that most of his customers are willing to spend money on their kids "but we need to be practical. On our part, we educate the parents that they need not fund 100% of the education. They have to take some amount of education loan. As the onus of that loan's repayment falls on the kid, she becomes more responsible and also studies harder." In some cases, Sadagopan even advises parents and their children to go beyond the top 10-20 colleges wherever scholarships are available."

Sunder was instrumental in convincing Uma to move into a rented apartment, rather than buy one. "Say, you buy a decent property for Rs3.5 crore, pay around 15% as down payment and take a loan for the rest. At roughly 10% interest rate, your monthly loan instalment outgo would be Rs2.5 lakh to own your house over the next 20 years. But for Rs35,000 to Rs40,000 you can rent a place that's worth Rs3 crore. You still get to live in a property that is just as nice," said Sunder. It's about choices, she added. Sunder believes that if people can afford to buy a house, and doesn't impact their financial future, they can buy one then.

Some parents, planners say, now realise that children may not be interested in inheriting real estate, especially those who aspire to settle abroad. Melvin Joseph, founder, FinVin Financial Planners, cites a new client who holds a senior position in a multinational company, hails from Satara-a town in Maharashtra-and has four properties there. His only son is set to go abroad for studies. "I asked him if his son would live in the small town to take care of his properties. He realised that his son would not. I see a trend that the new generation is not interested in real estate. They simply want to stay in a house close to their work place on rent and then leaving rest of the money in liquid assets...there is a shift happening from physical assets to financial assets," said Joseph.

Exercise caution
Amid all this change, some financial advisers also said that while aspirations may have gone up, the basics of financial planning remain the same. Gerard Colaco, a Mangalore-based personal investment services professional said that all his clients are nudged to plan for three goals: an emergency corpus that is worth a year of normal living expenses, a retirement fund and a general investment fund. "The greatest gift you can give your children is to not become a financial burden on them. Remember, as we grow older, our capacity to absorb a financial shock goes down and we become more vulnerable to diseases. The earlier generations used to plan for their retirement; the current generation has become lax on this front," said Colaco.

Whenever anyone tells Gaurav Mashruwala, a Mumbai-based financial planner, that she wants to retire early, he retreats. He thinks it's not humanely possible to base your entire future on a numerical assumption of a retirement corpus and the time you would require for that corpus. Bhatia of Asset Managers, too, said that early retirement goal-a trend many financial planners see in their clients-isn't as straight forward as it sounds. "This goal takes time to realise. Anyone who comes to me and says I want to retire at this age; then you need to walk him through the thought of what would you do after retirement."

In arrangement with HT Syndication | MINT