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Inculcating savings habit among emerging middle-class

Household savings are key to ensuring financial wellbeing, especially in countries like Pakistan, that do not have well developed social security nets. Emerging middle-class is rising as a consumer class that will play a significant role in the development of consumption-led economies. They are the consumers who are earning enough to start saving and investing and that’s what makes them a crucial engine for economic growth. They have a lot of pressing reasons to save: longer life spans, rising cost of education, health care and property. And they do save actively; two-thirds put aside for their top priority every month, while in India 17 percent of these consumers save every week.

The emerging middle-class are focused on achieving some very significant savings targets, from buying a home and providing an education for their children to thinking ahead to retirement. They are clearly ambitious, but they are facing a savings challenge. Despite this, they are active savers and, as such, are in a strong position to grow their savings. Though they are saving regularly, this emerging class is relying on basic savings account as an approach to saving money, which could add years to the amount of time it takes them to achieve their savings goals. The investment markets in Pakistan are less mature, but even here emerging middle-class savers could reach their goals sooner, just by moving one step up from their preference of basic savings accounts or cash to time deposits. By doing this they could be earning 25 percent and 82 percent more over 10 years, respectively.

It has been observed that 51 percent of Pakistanis in the age group of 25-34 years prefer to keep cash at home under their mattresses. The preference for keeping cash at home could stem from a number of factors, such as the desire to be able to access savings at short notice, wanting to avoid risk, or lacking investing experience. However, this would need to be considered against the risk of saving money as cash, such as theft, loss and the absence of interest. What financial institutions need to do in Pakistan is to come up with innovative savings solutions so as to de-mattress the cash which will also serve the purpose of documenting the economy.


Digital tools and services are central to effective financial management in the modern age. From budget tracking to online transactions and live chat, digital banking has evolved rapidly and is continuing to answer the changing needs of consumers worldwide. Digital banking tools have a good following among the emerging middle-class, with 23 percent using these frequently and more than half (54 per cent) at least sometimes. There are a lot of financial services that work particularly well in the online/mobile environment, particularly those that enable easy and convenient access to savings. These days, not many people want to queue in a branch to make a transaction. On the other hand, sometimes people want to talk to a real person, particularly for a big-ticket item like a mortgage or life insurance, so face-to-face advice remains critical.

Property is a top savings priority for a considerable proportion of the emerging middle-class. The prospect of owning a home is attractive and appeals to the preference for keeping their money where they can see it. Property ownership can fulfill a number of investment objectives, from increasing net worth and funding retirement to building assets to pass on to the next generation. But in Pakistan, property ranks lower than saving for their children’s education, emergencies and children’s weddings etc.

The top savings priority for each emerging middle-class age group is as follows:

  1. Age 25-34: Saving for a home
  2. Age 35-44: Children’s education
  3. Age 45-55: Retirement

Many among this rising class hope to one day own their own home – a major purchase and one that is becoming more challenging and more costly due to rising demand and increasing house prices. They also want the best education for their children, but costs are spiraling and competition for the top places can be high. The savings landscape is constantly evolving, driven by the changing habits of consumers and the market forces around them. These significant forces are putting increasing pressure on consumers to save more and to maximize the return on their wealth, in order to realize the future that they see for themselves and their families.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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