The inaugural edition of an Index by life insurer HDFC Life and research firm Value Notes on 'financial freedom' of urban Indian consumers reveals that investors aged 45 years and above have the highest degree of 'financial freedom' with a score of 63 on 100. This compares with a Life Freedom Index of 58.3 among all urban Indian investors.
The Life Freedom Index comprises five sub-indices: financial awareness (43.3), level of financial planning (62.7), sufficiency of financial planning (62.7), adequacy in financial management (63.5) and financial liberty (psychological feeling of financial freedom and security, 68 per cent).
Weight were assigned for each sub-index to arrive at the composite Life Freedom Index as under: awareness (25), liberty (5), planning (20), sufficiency (25) and adequacy (25).
Speaking to reporters at the launch of the Index, Mr Sanjay Tripathy, EVP and Head-Marketing and Direct Channel, HDFC Life, said, "The report clearly shows that the Indian consumer has the appetite for financial planning, but are not doing it well enough."
Interestingly, Tier 2 cities (59.3) show a higher sense of financial freedom then their counterparts in Tier 1 cities (57.8), according to the report.
The survey was conducted among 1,600 consumers across 11 cities - a sample segmented as Chief Wage Earner (aged 30 to 45 years), Wisdom Investor (over 45 years), Young Aspirant (20 to 30 years) and Urban Women (25 to 40 years).
The survey also indicates that 32 per cent of Indian urban consumers rely on 'self', 35 per cent on friends and relatives, while only 27 per cent seek professional help for financial planning.
The biggest concern during financial planning is 'expected events' such as children's education (75 per cent) among all respondents, followed by health expenses (61 per cent) and retirement (57 per cent). In contrast, 'unexpected events' and 'external forces' ranked much lower.
Between the four segments surveyed, an unexpected event like the Chief Wage Earner's death was factored in by 16 (urban women) to 36 per cent (CWE) consumers. An external event like inflation was a concern among 30 (urban women) to 36 per cent (CWE) consumers.
"Indians might plan for a wedding in the family, but on awareness of macro-economic factors like inflation, Indians score very low," said Mr Arun Jethmalani, MD, ValueNotes.
Stock market volatility was the least of concerns for consumers during financial planning - 8 per cent urban women and 13 per cent CWEs cited this as a concern.