 Understanding financial planning practices of generation –x and

Millennials in Mumbai
 Generation X and Millennials – the future of financial planning in
Mumbai
 Analysis of financial planning attitude of Generation X and Millennials in
Mumbai.
 A study on financial planning of Generation X and Millennials in
Mumbai.
 Analysis of financial planning awareness among generation X and
millennials in Mumbai.


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 1. Introduction

“If you don't take care of your money your money won't take care of you” rightly said by
― Mac Duke, the financial Strategist. Planning of money is essential for each and
everyone, be it a teenager or a retired citizen. Things, like buying a house, having children,
paying for their educations and weddings, and having enough money for a comfortable
retirement, are very essential. But the unexpected expenses like accidental home repair or
unplanned marriage or hospital bill can strain anyone’s finances. To face such situations an
emergency fund needs to be planned which will be a financial cushion to fight with
unexpected financial crisis. A financial plan can put people in control so one stay on track
regardless of what life throws at him – because Financial planning is important not only for
achieving one’s financial goals in different life stages but also fight with the unexpected
financial crisis that can occur in course of life.

A financial plan is a comprehensive evaluation of an individual's current pay and future

financial state by using current known variables to predict future income, asset values and
withdrawal plans. Financial planning is the process of meeting one‘s financial life goals
through the proper management of personal finances, it includes buying a house, saving for
your child's higher education or planning for retirement. Personal finance as a stem of
economics deals with budgeting, saving, investing, borrowing, lending, insuring, and
diversifying. Personal financial planning denotes the process of determining whether and
how an individual can meet life goals through the proper management of financial sources.
(CFP Board, 2005). Meeting those goals requires financial planning that considers all aspects
of financial life (Kapoor et al, 2014) like budgeting and managing taxes, liabilities,
purchasing decisions, managing insurance, managing investment, retirement and estate
planning.

The course of personal financial planning does not solely include the basic skills of decision
making, nor solely mathematics or numeric applications. It about the form of understanding
the relationship between values, beliefs, attitudes, emotions, the self-esteem of an individual
and decisions of spending, borrowing, saving and investing. Financial planning behavior can
be defined as any human behavior that is relevant to money management. General financial
behaviors consist of cash, credit and saving behavior. In a recent research, it was found 70%
of all Indians spend less than Rs.1,990 on online shopping per month, 57% of all Indians

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have less than Rs.5,000 in their savings account or emergency fund that conclude Indians are
spenders than savers.
The present study deals with understanding the financial planning behavior of existing
generations. This study will examine the financial planning behavior of generation X (age:
- 38-53 years) and millennials (Age: 18 -25 years) in the city of Mumbai. The study will
explore the basic financial planning patterns amongst the different generations regarding
how they save, where they invest, and how do they look at risk, returns and various modes
of investments and whom they approach for help.

1.1. Need for Financial Planning:

 People live a longer retired life now, as compared to the earlier generations. People start
earning by the time one reaches the age of 22 years, work till the age of 50 years and live
till around 65 years. In such a case, one earns for 25-27 years and lives off the retirement
savings for the next 15 years. So an individual works and earns for 25 years to support
post-retirement life of 15 years. Hence, one needs to create an adequate corpus for
retirement when expenses continue but income seems to be drying. A financial plan can
be an optimum solution for one's after retirement life which plan for you today for a
better tomorrow.
 The Indian investor has a number of investment options coming now and then to choose
from. Some are traditional investments that have been used across generations like real
estate, gold and fixed deposits while some are relatively newer options that have become
popular in recent years like Mutual Funds, equity trading, Portfolio Management
Schemes, National pension plans and Unit Linked Insurance. Since there are so many
types of investment vehicles, it is normal for an investor to get confused while calculating
returns and risk of each of them. Hence, it becomes difficult for investors to select the
right financial product to tailor their needs as many of them lack financial education and
knowledge.
 In India, millennials’ gross income is significantly higher than that of the older
generation: 57 percent of all working millennia’s are the chief wage earners in their
families. So their requirement for management of finance is definite.

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 In today‘s financial markets, there is easy access to loans resulting in increased levels of
borrowings by people. If not managed carefully, this may lead to a serious mismatch in
earnings and repayment leading to problems in cash flow.
 Indians are wise savers but poor investors (Visa 2014). Indians save money into
traditional risk-free products like Bank FD, Saving Bank Account, Insurance. This may
not be sufficient to overcome the impact of an increase in inflation. Therefore, a well-
balanced Financial Plan is required to protect the investors from the impact of inflation.
 Family’s financial security is also a significant part of the financial planning process. And
for that reason planning proper insurance coverage and policies is must.
Financial plan consider your personal circumstances, objectives and risk acceptance. It acts
as a guide in helping choose the right types of investments to fit one’s needs, personality, and
goals.

1.3 Financial Planning As Per Generations:

During 1990, chronological age as a segmentation criterion failed and so there was a need for
another criterion. Many researchers after review a complete set of empirical studies on the
topic, FitzgeraId-Bone (1991) concludes that age is irrelevant to the segmentation of mature
markets. One way of going beyond age-based segmentation was Gwrational G Jhon Theory
who Anchored in sociology, his theory considers that the individuals who experience the
same historical, social, cultural, political, and economic events during their coming-of-age
years — share common core values and behaviors over the course of their lives (Mannheim.
1952).
The theory work was then continued by Prof. Strauss and Howe who defined a generation in
1999 as the cumulative of all people born over a span of approximately twenty years or about
the span of one period of life. "Generation" is also frequently used synonymously
with cohort in social science; under this formulation it means "people within a delineated
population who experience the same significant events within a given period of time".
Generations are identified (from first birth year to last) by looking for cohort groups of this
length that share three criteria. First, members of a generation share what the authors call
an age, second encounter key historical events and third social trends while occupying the
same phase of life. For the purpose of this study, we use the following breakdown for
generations by birth year:

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  Greatest Generation, sometimes also referred to as the Silent Generation includes
those born before 1946, who will now be 74 years or older,
 Baby Boomers includes those born between 1946 and 1964, who will now be between
53 and 74 years old
 Generation X includes those born between 1965 and 1984, who will now be between
34 and 54 years old, and
 Millennials include those born between 1985 and 2004, which will now be less than
35 years old.

Existing studies have sporadic information on the individual generational cohorts and are
sparse on the differences and comparisons among generations.

1.4 Financial Planning and Generation X and Millennials

Generation X, called the "middle child" of generations, includes children born between 1965
and 1980. The Generation X attitude reflects a swing from a manufacturing market to a
service economy in India.

Money habits of generation X:

 Their major income is spent on buying luxury products and services.

 To pay off their debts including mortgages, credit cards, auto loans, student loans, and
personal loans.

 Their major investment source is real estate.

The millennial generation is the generation of children born between 1982 and 2004. As of
2016, there are 411mn millennials in India, according to the UN's Population database,
accounting for 30.6% of the country's total population, well ahead of any other age group.

Millennials are stereotyped to’ buy now, pay later’ and typically not saving enough for debt
payment or planning emergency fund. Their financial management is vital to the Indian
economy being major part of population they are economic driver of it. They are further
technically superior, self-empowered generation which has radically altered the main buyer
character of financial services firms around the world, thus forcing huge changes to their

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marketing strategies and business models."Millennials are also much more likely to use
newer forms of payment—including pre-paid debit cards and mobile payments." millennials
don't create a personal budget and spend most of their money on entertainment and luxuries.
Buying homes and retirement plans are not their priority.

Money habits of Indian millennials: -

1. Research conducted by ICICI revealed, the favorite pastime of the millennial generation
is travel. And 87% of affluent Indian millennial holiday overseas at least once every year.
2. They also spend a big amount on restaurant orders and on-line shopping
Generational Difference Chart

Generation X Millennial
Birth years 1965-1980 1981-2000
Current Age 38-53 18 – 37
Dealing with Pay cash Use credit
Money Save more Save less
Cautious Earn to spend
Asset They prefer buying assets They prefer either sharing or
accumulation renting assets
Hurdles Hurdling for retirement expenses Hurdling to meet current daily
expenses due to loans

Why Millennials need financial planning?

 Over Debt
 Lack of financial education and skills for investment
 Lack of financial security due to uncertainties in the economy
 Availability of numerous financial investments products
 postponing retirement goals

Why generation x need financial planning

 generation "x" contain bigger debts and assets both but have little or no insurance to
defend wealth in case of accident or emergency.
 Many of them only invest in real estate sector and lack investment in financial assets
 Lack proper wealth management plans

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1.5 Financial Planning in India:

As per RBI report of the Household finance committee, the average Indian household holds
84% of its wealth in real estate and other physical goods, 11% in gold and the residual 5% in
financial assets. Retirement play a very limited role in household balance sheets, even at the
top of the wealth distribution. Indian households continue to accumulate debt as they
approach retirement age, and most debt is unsecured (56%), reflecting an unusually high
reliance on non-institutional sources such as moneylenders. The contribution rate of Indian
family in financial assets is well lower than the one observed in developed countries. This
pattern has been recognized and there has been a sustained drive to spread financial
awareness in the country through different programs conducted by RBI and NSE.

Unfortunately, the majority of savings in Indian households lie in Fixed Deposits and PPF
accounts which are low interest earning and sometimes don’t even cover inflation. Hence real
returns are negative. Individual will only move to new introduced financial assets in a big
way if products are made easily available and trust is created by overall financial architecture
for individual through promised returns over their savings. And this modification can be
infused by awareness of financial planning among Millennials and generation X which
constitute more than 65% of the total population in India.

People still haven’t understood the

benefits of creating a financial plan under professional advice, because financial planning and
investments are made with adequate research. Hence for expert advice Certified Financial
Planners are available in India accredited by Financial Planning Standards Board of India.
Appropriate personal Financial Planning helps in reducing the financial uncertainties which
can be a hindrance to the growth of the country. This also helps in ensuring stability and
prosperity in concern.

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2. Background of the study:-
Finance, in the 21st Century, can be planned as per one’s life cycle stages or the generation
which is an addition to life cycle stages theory. In recent times, many financial planners or
advisors present their target population in terms of the generation they belong because now
the patterns of life cycle stages don't ensemble to present generation. For example, now
education continues till age 25 and people plan marriages in their thirties or after, a kid in
mid-thirties or they might plan baby as a single parent through surrogacy, etc which is far
inappropriate to life cycle stages. So financial planners found only age cannot be a criterion
for consideration .Hence, they started application of generation theory where age, historical
events, social culture and political happenings that are commonly shared is also considered.

A NewYork based certified financial planner, Mr. Douglas A. Boneparth who is also now
head of CNBC Digital Financial Advisor Council, 2018, and CFP Board Ambassador for
New York, too agree that segmenting population based on generations will widen the target
and will be easy to advise based on their generational behaviour and attitude. He was so
convinced that he ended up writing a book named The Millennial Money Fix where he
explains about the financial habits of Millennials and also advises them how to plan their
finances wisely.

Many of the financial planners in India have also considered this study significant and
presented articles on the same. An Indian certified financial planner Mr. Suresh Sadagopan,
founder, Ladder7 Financial Advisories said in interview with Livemint on 21 december, 2018
that ‘Our firm also initiated segmenting customers by generations because he found that
investment pattern and risk pattern and financial habits of same age cohorts are similar’. He
also said that’s when millennials plan for investments and tax planning. “A majority of them
end up following the herd mentality and buy insurance policies to save taxes or invest in post
office savings schemes. They do so because their parents did it or family members or friends
are doing it. They lack proper financial knowledge and importance of personal financial
plans. In India a certified Investment planner and Head writer at Mint Money, Mr. Ashwini
kumar recently wrote on “How Millennial Investing Trends Differ from Their Parents' dated
14 Jan, 2019, in this article he has explored the diverse investment by current generation into
traditional financial vehicles such as bank deposits, gold due to their parents influence. And
the changing trend of some Millennials generation who are opting for information out on
internet and professionals and has started investing in tax savings as well as in return oriented
plans.

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3. Rationale

Strengthening of any economy depends upon the financial well-being of the residents of the
country. Past researches show that the financial well-being of individuals depends upon their
financial literacy& knowledge and attitude towards personal financial planning.

The financial planning of Millennial has raised great concerns in India as it is home to
40crore Millennials, the highest millennial population in the world, says a wealth report
published by Julius Baer, one of the largest wealth management firms in the world.

Both generations X and Millennials account for more than 69% of the total Indian
population. And Millennials are making more money than their previous generations, as
stated in ET money. That also rises the fear of consumer related financial distress in the
wider economy due to excessive spending on online shopping and luxuries, travelling
abroad, higher education cost, vehicle loans, and credit card debt levels .Therefore, creating a
secure financial future is extremely important for them and for the economy at large.

Personal finance is a research area that gains momentum, as The Aviva Plan India Plan
survey, 2018 concluded “Indians lack the discipline to create strong financial plans that
would secure their futures, thus exposing themselves to unnecessary risks. And a focus on the
generations can be of substantial interest as every specific generation don’t only share age but
also share a history , common culture, beliefs, values and a set of experiences that influenced
their lives. Every generation encompass different attitude, beliefs, values and thinking
process. It is a new approach to market segmentation which is implemented in every
field whether its economics, marketing or finance. So to deal with the larger part of
Indian population the study has chosen generation-X and Millennials.

The study is designed to answer underneath questions:

 How financial knowledge influences the investment decisions of generations and

what are the sources of gaining financial knowledge for them.
 How does every generation identify financial risk and security, and are the different
generations aligned with each other or not?
 Which investment options are preferred most by both generations?
 Which source of receiving financial advice do they value more – from parents or a
professional advisor?

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The present study will research the personal financial planning attitudes of generation X
and millennials in Mumbai. It will be inclusive of about their level of knowledge regarding
financial investment options, components of a financial plan, whether they seek
assistance while financial planning , whom they approach for such help and if they seek
professional help than what will be the criteria for selecting a financial planner. Also if
the generation is educated than do they implement their knowledge while making financial
plans? In the end, the study will also provide suitable financial plans for each generation after
consulting expert financial planners in Mumbai.

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4. Research methodology

4.1 Statement of problem

The present study will deal with understanding the financial planning behavior of generation
X and Millennial in Mumbai. This study will examine the financial planning behavior of
generation X (age: - 38-53 years) and millennials (Age: 18 -25 years) in the city of Mumbai.
The study will explore the basic financial planning patterns amongst the different generations
regarding how they save, where they invest, and how do they look at risk, returns and various
modes of investments and whom they approach for help.

4.2. Aims and Objectives:

1. To study and to analyze the awareness of Personal Financial Planning among

generation X and millennials of Mumbai
2. To identify the factors influencing the personal financial planning behavior of both
generations.
3. To study how generation X and millennials manage their finances, investments, and
risk.
4. The challenges faced by generation X and millennials while developing and
implementing a financial plan.
5. To discover whom generation X and millennials approach for financial advice.
6. To describe the benefits of financial planning for millennials and generation X.
7. To examine the need for Financial Planner by millennials and generation X
8. What are the challenges faced by financial planners when they deal with generation X
and Millennials?
9. To study and to analyze the attitude regarding Personal Financial Planning among
generation X and millennials.

4.3. Hypothesis:

H01: There is no significant association between the Age and financial literacy of the
respondents.

H02: There is no significant association between the Income and financial planning of the
respondents.

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H03: There is no significant association between financial literacy and financial planning of
the respondents.

H04: Awareness of different Investment avenues does not differ significantly with respect to
the gender of the respondents.

H05: There is no significant association between Gender and financial planning of the
respondents.

4.5 Collection of data:

Data would be collected with the help of surveys, interviews, and questionnaires. The survey
would be done in two parts. The first part would be done with the help of millennials and
generation X to understand their awareness of personal financial planning in Mumbai. The
second part would be undertaken with the help of financial planners and investment planners
to understand what difference of thoughts and challenges they face while creating plans for
both generations. Interviews would be fielded to financial planners, investment advisors;
insurance agents and financial companies will also be conducted and will be used for analysis
and interpretation. Apart from collecting information from primary sources, an extensive
review of literature will be undertaken through various books, research reports, periodicals,
journals, government publications and also web media.

4.6 Research Design and sampling:

For purpose of fulfilling the objectives defined earlier Descriptive Research Design is
considered most suitable. Hence it will be adopted for conducting the study. Sampling Unit
of the research will be persons aging from 18 years to 53 years. Non Probability technique of
selecting sample will be used for the study. The sampling method used will be Random
Sampling. For collecting the interviews, Structured Interviews will be conducted. The sample
unit for research will be 2000 respondents aging from 18 yrs to 53 years from Mumbai
suburbs. The Sample Profile will be:-

Generation X of Western Suburb of Mumbai 250 From Age Group 36-45

250 From Age Group 46-53
Millennials Generation of Western Suburb of Mumbai 250 From Age Group 18-25
250 From Age Group 26-35
Generation X of Central Suburb of Mumbai 250 From Age Group 36-45

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 250 From Age Group 46-53
Millennials Generation of Central Suburb Of Mumbai 250 From Age Group 18-25
250 From Age Group 26-35
Financial planners in Mumbai Around 50
Others Mutual fund analyst, investment planners,
insurance agents.
The selection of the tools for a particular study depends upon the various considerations such
as the objectives of the study, the amount of time at the disposal of the investigator and the
availability of suitable tests. Appropriate statistical tools like T-test, chi-square & ANOVA
will be used to analyze the data. To find the association between Awareness level of
generation X and millennials towards various investment avenues and different demographic
variables, the Mann Whitney U Test and Kruskal Wallis H Test will be used.

4.7. Conclusion

The present study focuses achieving the above listed objectives, verifying the hypothesis with
the help of well-adopted research methodology with the intention to provide
recommendations and suggestions for the statement problem .subsequently, educating the
generations on creating proper financial plans by adopting good financial and investment
habits. Also, it will help generations to better understand the process and components of
financial planning. It will also help financial institutions, Financial Planners and Investment
Advisors to understand the attitude of their customers and help them in a better manner.

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5. Expected Outcome:

The present study will provide guidelines to Millennials and generation x in creating their
financial plans by educating them the process and components of financial plan. It will also
act as roadmap to achieve their financial goals by advising suitable financial habits.

The research will help financial planners and Investment Advisors, to better understand the
attitude of investors regarding Personal Financial Planning and issues which may influence
the decision for Financial Planning.

The analysis covered in the study will help SEBI, RBI, and, Banks & Other Financial
Institutions who conducts financial awareness seminars in the country regarding the attitude
of both generations towards investments for planning their campaigns.

The fact that Millennials will be the largest client group is a challenge faced by all finance
companies inclusive of insurance, financial advisors, investment advisors, etc. subsequently
it is essential that these companies find ways to connect with Millennials and generation X,
to sell their policies and products. This research will do that part of helping companies in
targeting both generation individuals and designing advertising and promoting products in
the manner required by them.

This research will be assisting generations in making their financial plans. It will equip them
with knowledge about money, and influencing their attitudes toward making rational
financial decisions and reducing their financial risk and uncertainties.

And it is said that Balanced Personal Financial Plan also plays a vital role for Financial Well
Being of an individual and country at a large.

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6. Chapter Scheme:

The sequence of contents will be as follows:-

Chapter No. Contents

1. Introduction
2. Literature review
3. Research methodology
4. Analysis and interpretations
5. Findings and recommendations
6. Conclusions and Scope for Further Study
7. References
8. Annexure

7. References:

1. Agarwal, S., Amromin, G., Ben-David, I., Chomsisengphet, S., & Evanoff, D. D.
(2015). Financial literacy and financial planning: Evidence from India. Journal of
Housing Economics, 27, 4-21.
2. Prof. Avni, T.P., Nov 2017, "A Study of Awareness, Attitude, and Factors
influencing Personal Financial Planning for Residents of Gujarat"-
GUJARAT.
3. Chen, H., & Volpe, R. P. (1998). An analysis of personal financial literacy among
college students. Financial services review, 7(2), 107-128.
4. Prof.CHEN ELAIN, Nov 2014, Financial Planning and Financial Literacy
of Malaysians in Klang Valley- Malaysia
5. Hung.c."Nov 2006, "personal financial planning: strategies for successful
practice management. The University of Pretoria.
6. Mane, S., & Bhandari, R. (2014). A Study of Investor‘s Awareness and Selection of
Different Financial Investment Avenues for the Investor in Pune City. International
Research Journal of Business and Management, 4, 45-51.

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