This rising consumer class could make more on their savings by changing how they manage their money and reach their goals sooner
Emerging affluent consumers in Asia could boost their savings by an average of 42 percent if they move from a basic savings approach to a low-risk wealth management strategy, a new Standard Chartered study shows.
The emerging affluent are consumers who are earning enough to start saving – and investing – and that’s what makes them a crucial engine of economic growth.
The Emerging Affluent Report – The Race to Save reveals how this rising consumer class are losing out on savings as a result of an overly simplistic approach to their personal finances; in some cases, cash is sitting under mattresses instead of in bank accounts.
While the emerging affluent are ‘active’ savers, with two in three (67 percent) putting money aside every month, a majority are using basic products – savings accounts and fixed-term deposits – to reach their financial goals.
A switch to a more effective approach could make a huge difference. Consumers in Hong Kong, Singapore, India, and Taiwan could increase their savings by as much as 86 per cent, 52 per cent, 48 per cent and 43 per cent respectively over 10 years.
Growth in 10-year returns by switching from a basic savings approach to a low-risk wealth management investment approach
The emerging affluent in Pakistan could be even further away from reaching their savings targets, with 50 per cent of them storing cash at home to reach their top savings goal, receiving no interest or investment returns at all.
The study of 8,000 emerging affluent consumers across eight markets in Asia and Africa also finds that home ownership and children’s education are top savings priorities for most individuals – ahead of retirement. Saving for life after work only comes out on top for the 45-55-year-olds, except in India, Kenya, and Pakistan, where children’s education is the priority for almost all age groups (see appendix).
Karen Fawcett, CEO of Retail Banking, Standard Chartered, said: “These ambitious consumers have pressing reasons to save: longer life spans and the rising cost of education, health care and home ownership. With access to the right information and simple, low-risk wealth management solutions, they will have a better chance of achieving their goals of owning a home, funding their children’s education and putting enough aside for their retirement.”
Shezad Arif, Head of Retail Banking, Standard Chartered Pakistan, said: “The emerging affluent survey has given us interesting insights into the saving habits of people in Pakistan. On an average the country’s emerging affluent saves 14 per cent of their income every month. Financial institutions should take a broader approach and introduce innovative Wealth Management solutions to help this segment achieve their saving goals.”
Other findings from the study, now in its third year, include:
Saving regularly but less confident
The emerging affluent are saving regularly but their confidence seems to be slipping. At the end of 2016, fewer emerging affluent consumers in China, Kenya, Hong Kong, India, and Singapore were confident in reaching their savings goals (72 percent), compared to 2015 (83 per cent).
The digitally-savvy save more
Digital banking tools have a good following among the emerging affluent, with more than half (54 percent) saying they use them at least sometimes and almost a quarter (23 percent) using them frequently. The latter save, on average, 8 percent more of their income than those who use digital tools less often or not at all.
China’s emerging affluent: the most entrepreneurial and digitally-savvy
When it comes to digital uptake, China stands out. Chinese emerging affluent are the most likely to use digital tools and services frequently (47 percent) and get expert money advice on social media (37 percent). They are also the most entrepreneurially-minded. A quarter (25 percent) cite funding a business as a top three priority, rising to one-third (32 percent) among millennials (aged 25 to 34).
Low-interest rates deter savers
While the vast majority of the emerging affluent (96 per cent) do save, many say that low-interest rates discourage them from saving more than they currently do. Almost a third (30 per cent) of people in the markets surveyed say low-interest rates stop them from saving more. This sentiment is felt strongest in China (39 percent), Korea (38 percent), Taiwan (38 percent) and India (32 percent).