Their Story. Do students take stock of the markets?

If you want to be a successful investor, you need to start early. At least that is what all the pundits say. But how savvy are urban students in matters of finance? Do they prepare a budget for their expenses and, more importantly, do they adhere to these budgets? How much do they know about investment vehicles?

We spoke to students, aged between 18 and 24 and living in urban areas, to understand their spending and investing habits. Here’s what we found.

Overshooting the budget Urban students seem to be at the forefront, driving consumerism in the country. As the surplus in the hands of the urban population increases and their purchasing power goes up, parents appear to be loosening their purse-strings considerably. This lets students spend freely — on clothes, concerts, games, whatever.

Not much time is spent in deciding where to spend as most buying seems to be done on the spur of the moment. This lack of planning and impulse spending results in their exceeding their budgets constantly.

Sanjay Pitchai, an Actuarial Sciences and Economics student from the University of California, says, “I plan to spend about $100 on entertainment and constantly over-shoot the budget.” Vignesh Kiran, a student of Loyola College of Arts and Commerce, who is an avid follower of Carnatic music, says “I require ₹3,000 per month but I exceed my budget every month and spend more.”

Entertainment is a key area that accounts for a chunk of student spending. Arjun Sethuraman, also at Loyola College of Arts and Commerce, says, “Entertainment for me mostly includes gaming and driving around. I buy a lot of games, rather than spending on gadgets.”

“I like music and so I spent around ₹2,000 last December during the Margazhi Music fest,” says Vignesh.

Youngsters also seem to be inclined towards buying the more expensive brands, which bumps up the bill considerably. “Calvin Klein, Nike and Tommy are my favourite brands. I do not own much of non-branded products,” says Arjun. Such brand-specific spending sometimes takes his expense to as high as ₹30,000 in a month.

Earning and investing So, where do they get the money for all the spending? Since not all parents provide big amounts as pocket money, students looks for avenues to earn while they learn. “Taking a small job in a restaurant or hotel, opting for paid internships, etc, are ways through which a student can make money,” says Sanjay.

Earning while learning also helps them develop the habit of saving. “Apart from spending on myself I am putting aside some money. I track the stock market and intend to invest in it, in the future, from the money that I save now,” says Sanjay. “I am currently planning on increasing my savings so that I can invest them in mutual funds in the future,” adds Arjun.

More students are now drawn towards stock market investing, as shown by Sanjay and Arjun. “As a member of a club in Briun Value investing (BVI) which does value investing, I have currently invested more than $100 in the stock market.” says Sanjay. Clubs like this provide an opportunity for students interested in investing in the stock markets.

However, money is not the main objective behind students stepping into the financial markets. Many start investing mainly to gain knowledge on how markets work, learn all about the way companies operate and also to understand the financial concepts that they learn in their academics.

“I am interested in investing in the stock markets. I do so not for financial gains but to get insight into how companies work,” says Vignesh.

Avinash wants to try his hand at the stock market and has invested in HDFC, Nestle and L&T. He keeps himself regularly updated on the market. “Investing in stocks has taught me how to read the Sensex and understand many financial concepts.”

“I have learnt a lot from investing in the markets apart from making money,” adds Arjun.

Starting early on saving

For students keen on investing, there are many options, including fixed deposits, stocks, bonds and even physical assets like real estate.

According to Balachander, Founder, JMN Investments Research Pvt Ltd, spending on learning is also a good investment. “Money spent by an individual to enhance his own skills can also be considered as a good investment as it will eventually improve his earnings capacity. College education is considered one of the best investments that can yield a good return.” He advocates encouraging students to develop the habit of saving. “Learning and starting to save at an early age will increase the power of compounding in addition to developing discipline while spending money,” adds Balachander.

He also cautions that being very brand-conscious on the personal spending front could be a problem as it will result in overspending which in turn will reduce the quantum of saving for the desired goals. Although he agrees that extensive use of the latest gadgets becomes a part of every student’s life, Balachander advises students to discriminate between essential spending and otherwise, so as to avoid unnecessary big-ticket expenses.

Students should take up part-time jobs in their prospective career fields as it would provide them with a head-start in the right direction, apart from helping them to decide their future more easily.

The writer was an intern with BusinessLine

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