A survey has come out with some very interesting and surprising findings that may contradict general opinion about Indian families. One may not believe but a whopping 85 per cent of households in urban India do not keep any funds for meeting emergency expenses.
The industry body Assocham, which has done the survey, interacted with about 1,500 individual households at 10 urban centres namely Ahmedabad, Bangalore, Chennai, Delhi-NCR, Hyderabad, Jaipur, Kolkata, Lucknow, Mumbai and Pune between May-July this year.
About 1,275 respondents said they have not set up any fund to deal with emergencies such as sudden job loss, death or a medical emergency in family, natural calamities, delay in income, and sudden relocation.
Majority of these said they have parked maximum of their hard earned funds in debt/equity market, realty sector, bullion and safe securities such as bank fixed deposits, provident fund and other such investment instruments, but the main glitch is that these investments cannot be easily liquidated without major tax consequences.
The respondents cited various reasons for not maintaining an emergency fund as there are very few investment options that keep money both readily available and safe. Besides, many even said they have deliberately not maintained an emergency fund as it’s ought to be liquid as far as possible, which gives lower returns.
“A contingency fund is not there to make money but to ensure it's there in case need arises and for that it should not be in anything that is volatile but something that is easily encashable within a day’s notice or so and something not necessarily large but effective,” said D.S. Rawat, Secretary General, Assocham.
The survey suggests urban households that they must save at least 25 per cent of their monthly income in liquid cash which is easily accessible to meet the contingencies. People should maintain a cash reserve large enough to cover three to six months' worth of household expenses.
Many of the respondents said in case of an emergency they would either be forced to take a loan, borrow money from relatives or friends, disregard other monthly expenses and even be forced to mortgage or sell off their assets.
While backing the findings of the report, Delhi-based youth Akshay Kapoor said that the growing mall culture in the cities has not left any scope for creating any emergency fund.
“Since the mall culture rose in India, families have started spending more on recreational activities, as well as shopping for frivolous products and eating out. This leaves no scope for creating any emergency fund, which was actually a part of Indian households till the late 1990's. It is important for Indian families to save on their earnings to create some sort of fund for troublesome days,” Akshay Kapoor told this Citizen Journalist
However, media professional Mamta Singh Sharma, who is also a home maker, does not buy the findings of the survey. “85% is not a realistic figure. There would be less than 85% households, which would not be having emergency funds,” said Mamta Singh.