A Study on Saving and Spending Habit of Youth

A Study on Spending and Saving Habit of College Students.

A STUDY ON SPENDING AND SAVING HABIT OF COLLEGE STUDENTS Dissertation submitted to Mahatma Gandhi University, Kottayam in the practical fulfilment of the requirement for the Degree of Bachelor of Commerce

PROJECT REPORT

SHAMNAS SHAJI VIPIN REGHUNATH VISHNU CHANDRADATHAN Final Year B.Com

Under the guidance of Ms. RINTU JOSE

DEPARTMENT OF COMMERCE NEWMAN COLLEGE THODUPUZHA (Reaccredited by NAAC with ‘A’ Grade)

MARCH 2016

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A Study on Spending and Saving Habit of College Students.

INTRODUCTION With the revolution in the retail sector in India and advent of mall culture, the spending and saving habits of youth have changed over the years. An over exposure to marketing communication activities of the companies, the youth has turned to be more brand conscious and also spend a considerable amount of their income on entertainment and gadgets. With the increase in spending power of adults, even the young have become free-hand spenders and spendthrifts in some cases. This study address the question of why, where, and how the youth spend? The youth referred to here are college students in under graduation and post graduation. The age group of 15-25 years is that part of the society which is immortalized in advertisements. The west depicts this youth as financially and emotionally free, but in India the case is not the same. Despite being financially dependent on the parents till about an age of 15-25 years, there is a radical difference observed in the spending behaviour of the youth of our country. Youth savings accounts are one tool with the potential to encourage both youth development and financial inclusion possibly even in a financially sustainable way. For individuals, a financial cushion such as savings is clearly useful in mitigating the impact of economic shocks. Research has shown that making formal sector savings accounts available can boost this financial cushion among both youth and adults. Research and experience to date suggest that savings accounts for low-income youth may be a high-leverage tool to achieve both youth development and financial inclusion objectives. The study has been undertaken to analyses the spending and saving habit of college students especially in Newman college Thodupuzha. The main reason behind the study is the youth spend more than their income and saving habit is declining. This study shows the various spending and saving avenues for youth and how they maintain their financial requirements with limited income and high expenses.

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A Study on Spending and Saving Habit of College Students.

STATEMENT OF THE PROBLEM With cultural shift to westernization in India and advent of mall culture, the spending and savings habits of the students have changed over the years. Youth has started to spend more money on entertainment and lifestyle and has become more brand conscious. With the increase in standard of living of adults, the young have also been empowered with more money and have got more spending power. Similarly the saving habit in youth is drastically declining over the years. This paper is an attempt to study the spending and saving habit of undergraduate and postgraduate students in Newman College, Thoupuzha.

SIGNIFICANCE OF THE STUDY The spending and saving habit of college students is a relevant topic in this current scenario because the income of students is very low and expenses are very high. It is important to study that how will they manage their expenses with their limited income. The studies proves that savings in students is declining. This study is conducted to understand the various spending patterns of college students specifically; the spending patterns of male students were compared to the spending patterns of female students. The post graduate students and under graduate students are separately studied.

OBJECTIVES OF THE STUDY 

To study the spending pattern of two groups (graduation, post graduation)



To study the avenues of savings practiced by the youth today.



To study gender wise spending of the students.

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A Study on Spending and Saving Habit of College Students.

SCOPE OF THE STUDY The scope of the study is restricted to the students studying in Newman College Thodupuzha. Both arts and science students in undergraduate and postgraduate level are considered for the survey.

RESEARCH METHODOLOGY This study is based on primary as well as secondary data, however primary data collection has given more importance since it is overhearing factor is student’s attitude. The population studied here is the under graduation and post graduation students in Newman College Thodupuzha. The research is analytical and tool used for data collection is structured questionnaire. 

Primary Data – A questionnaire was prepared and the primary data was collected through survey method.



Secondary Data – Web sites, Publications.



Sample Size - The population being large the survey was carried among 100 respondents. They will be considered adequate to represent the characteristics of the entire population.



Sampling procedure - Convenient Sampling



Sampling Technique – Convenient Sampling



Sample Size – 100



Sample Design – Data has been presented with the help of bar diagram, pie charts etc.

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A Study on Spending and Saving Habit of College Students.

LIMITATIONS OF THE STUDY 

The study is limited to the 50 undergraduate and 50 postgraduate students in Newman College Thodupuzha.



An interpretation of the study is based on the assumption that the respondents are given correct information.



Besides, the study has the limitation of time, place, and resources.

CHAPTERISATION The present study “A Study on the Spending and saving habit of College Students” is organized and presented in various chapters. The first chapter contain introduction, statement of the problem, significant of the study, research methodology, limitations and chapter scheme. The second chapter deals with the theoretical framework, which contain details about various spending and savings avenues for youth The third chapter consist of findings, suggestions, recommendations and conclusion. A questionnaire is also included at last in Appendix.

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A Study on Spending and Saving Habit of College Students.

CHAPTER 2 SAVING AVENUES

1, BANK DEPOSIT The most important function of bank is to accept deposit from the public. Through this function banks pools together the scattered savings of the society for being used for productive purposes. The various types of deposits accepted by banks form a good avenue of investment to customers. The different types of deposits by a commercial bank are:

1) Fixed Deposit or Time Deposit. In the case of fixed deposit, money is deposited for a fixe period of time and can be withdrawn only after the expiry of the period. The rate of interest on this type of deposit is higher as compared to other type of deposits. At the time of making FD, the bank issues a receipt to the depositor known as fixed deposit receipt. It contains the amount deposited, the name of the depositor, rate of interest, and maturity date. It has to be surrendered to the bank on the due date for getting back the deposit amount together with interest. Key features  Involves placing funds with the bank for a fixed term (not less than 30 days) for a certain stipulated amount of interest.  The ideal investment time for bank FDs is 6 to 12 months as normally interest on bank less than 6 months bank FDs likely to be low.  The time frame assumes importance as early withdrawal may carry penalty.

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A Study on Spending and Saving Habit of College Students.

2) Current Deposit or Demand Deposits Current deposit are those deposits into which money can be deposited any number of times and form which money can be withdrawn as many times as the depositor wants. These accounts are usually maintained by traders and business men who have to make number of payments on a single day. Current deposit s are payable on demand and hence are called demand deposits. Very low rate of interest only is paid on these accounts and hence it cannot be considered as an investment.

3) Saving Deposits In the case of saving deposits, customers can deposit any amount of money at any number of times. But certain restrictions imposed on the number of withdrawals. Cheque facility is provided to the saving depositors. Currently interest is calculated on the daily balance available in the account.

Key features  Often the first banking product people use.  Low interest however, high liquidity  Suitable for inculcating the habit of saving among customers.

4) Recurring Deposits In the case of recurring deposits or RD, a fixed sum of money is invested every month for a predetermined period. The rate of interest on these deposits is almost the same as that of FD. The period for which such a deposit is opened varies between one year to ten years. On maturity the depositor gets back the amount deposited together with the interest accrued. 7

A Study on Spending and Saving Habit of College Students.

Key features  Some fixed amount is deposited at monthly intervals for a pre-fixed term.  Earn higher interest than savings bank account  Helps in the saving of fixed amount every month.

2, POST OFFICE SAVING SCHEME Post office saving scheme provides a safe or risk free and attractive savings for small investors. Since post offices are spread all over the country, post office savings are ideal saving avenues, particularly to small investors with limited income. There are about 155000 post offices across the country from which various the products offered by the postal department suiting the investment requirements of the customers can be purchased. The following are the major saving schemes offered by the Indian Postal Department.

1) Savings Bank [SB] account The savings bank account facility offered by Indian Postal Department is on similar lines with that of the SB account of commercial banks. The post office saving bank is the oldest and one of the largest banking system in the country, serving the investment needs of both urban and rural people. The post office SB enables the account holder to make regular deposit and withdrawals from the account. Cheque facility is also available in this account. Tax benefit is another important attraction because interest on post office saving bank is absolutely tax free.

2) Recurring Deposit [RD] account This is a five year monthly investment option which offers a higher annual interest. Deposits of small denominations are possible without any maximum limit. At the end of five years there is an option to extend the account period for another five year to year basis. Insurance cover facility is also available with some conditions. 8

A Study on Spending and Saving Habit of College Students.

3) Time Deposit [TD] This is a fixed deposit option for period ranging from one to five years with facility to draw yearly interest offered at compounded rates. Interest is payable annually but calculated quarterly. The interest rate ranges from 8.2 percent from one year deposit to 8.5 percent for that of five years. There is a facility for automatic credit of interest to SB account. The minimum amount of deposit is Rs 200 and multiples thereof. There is no maximum limit for the amount of deposit. Investment in TD is eligible for tax benefit under section 80C.Only individual can open TD account. Group accounts and institutional accounts are not permissible.

4) Monthly Income Scheme (MIS) The MIS is a safe and sure way to get regular monthly income. This scheme offers an opportunity for fixed investment for five years with monthly interest payment facility. The facility for automatic credit of interest to SB account available. It is especially suitable for retired employees, senior citizens, etc. The rate of interest is 8.50 percent. The minimum amount of deposit is Rs 1500 in both single and joint account.

3, CHIT FUNDS A Chit fund is a kind if savings scheme practiced in India. A Chit fund company is a company that manages, conducts, or supervises a chit scheme. It is regulated by provisions of Chit Fund Act, 1982. According to Sec 2(b) of the Chit Fund Act, 1982, “Chit means a transaction whether called chit, chit fund, chitty, committee, kuris or by any another name by or under which a person enters into an agreement with a specified of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical instalments over a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to the price amount.”

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A Study on Spending and Saving Habit of College Students.

Why People join in chit funds?  Easy to join as there is no formalities needed.  High promised return  Option of small deposit  High liquidity  Door to door collection by the agent

Kinds of Chit Funds in India There are three kinds of chit funds in India  Chit funds run by State Governments like Kerala State Financial Enterprises (KSFE) and Mysore Sales International Ltd and PSU runs chit funds.  There are registered chit funds which are run by big business houses and are registered.  Unregistered chit funds, which are run on the basis of friendship and close proximity of the members.

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A Study on Spending and Saving Habit of College Students.

CHAPTER 3 ANALYSIS AND INTERPRETATION OF DATA GENDER WISE CLASSIFICATION OF RESPONDENTS Table 3.1

UNDER GRADUATION POST GRADUATION

MALE

FEMALE

13

37

7

43

Figure 3.1

45 40 35 30 MALE

25

FEMALE

20 15 10 5 0 UG

PG

INTERPRETATION: The study is conducted in UG and PG level. In 13 male students and 37 female students and in PG 7 male students and 43 female students are taken for the study. 11

A Study on Spending and Saving Habit of College Students.

EDUCATION WISE CLASSIFICATION OF RESPONDENTS

Table 3.2

UNDER

50

GRADUATION POST

50

GRADUATION

Figure.3.2

POST GRADUATION 50%

UNDER GRADUATION 50%

INTERPRETATION: For this study 50 UG students and 50 PG students are taken.

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A Study on Spending and Saving Habit of College Students.

SOURCE OF INCOME (EDUCATION WISE) Table 3.3 Source of Income

UG

PG

Total

Pocket Money

38

40

78

Scholarship/ Grant

21

11

31

Job (Part time/ Weekend)

4

4

8

Others

11

6

17

Figure 3.3

40 35 30 25 20 15 10 5 0

UG PG

INTERPRETATION: From the above graph it is evident that about 57.78% of income of student is from pocket money. And of 23.7% is from scholarship and Grand. Here 6% of incomes from part time or weekend job and that of 12.6 % income from other sources.

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A Study on Spending and Saving Habit of College Students.

SOURCE OF INCOME (GENDER WISE) Table 3.4

Source of Income Pocket Money

Scholarship/ Grant

Job (Part time/ Weekend)

Others

Male

Female

Total

19

59

78

(59.375%)

(57.28%)

(57.78%)

6

26

32

(18.75%)

(25.24%)

(23.7%)

4

4

8

(12.5%)

(3.89%)

(6%)

3

14

17

(9.37%)

(13.6%)

(12.6%)

Figure 3.4

Others

Job(part time/ weekend) Female Male

Scholarship/Grant

Pocket money 0

10

20

30

40

50

60

INTERPRETATION: About 78% of students get their income through pocket money. 59% male students have pocket money. Among females, their majority source of income is pocket money. 12.5% male students do part time job to earn money. Only 4 % female 14

A Study on Spending and Saving Habit of College Students.

students do part time jobs. 18% males get money through scholarships and grant and 25% of girls get scholarships and grants.

AMOUNT OF MONEY GETTING PER MONTH (EDUCATION WISE) Table 3.5

Class

UG

PG

Total/ Percentage

2000

3

2

5

Figure 3.5

35 30 25 20

UG

15

PG

10 5 0 2000

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A Study on Spending and Saving Habit of College Students.

INTERPRETATION: Here, majority of students have income less than Rs 500 per month. That is about 58% of students have income less than Rs 500. Only 5% of students have income more than Rs 2000. About 24% is in between the class 500 – 1000. Here about 13% of students have income in the class of 1000 -2000.

AMOUNT OF MONEY GETTING PER MONTH (GENDER WISE) Table 3.6

Class

MALE

FEMALE

Total/ Percentage

2000

4(20%)

1(1.25%)

5

Figure 3.6

>2000

1000-2000 Female Male

500-1000

Savings

26

29

55

57.89%

Spending = Savings

8

7

15

15.78%

Spending < Savings

12

13

25

26.31%

Figure 3.21

30 25 20 15 UG

10

PG

5 0 Spending > Saving

Spending = Saving

35

Spending < Saving

A Study on Spending and Saving Habit of College Students.

INTERPRETATION: The above table and figure shows saving and spending status of UG and PG students. More than 50% of students spend more than they save. Small portion students have an equilibrium status, that is saving is equal to spending. About 26.31% of students save more than they spend. 26 students in UG and 29 students in PG have spending greater than savings. 8 students in UG and 7 students in PG have an equilibrium status i.e., spending equal to saving.12 students in UG and 13 in PG have spending less than savings.

SPENDING AND SAVING STATUS (GENDER WISE) Table 3.22

Spending> Saving

Spending= Saving

Spending< Saving

Male

Female

7

49

(41.17%)

(62.82%)

4

11

(23.525)

(14.1%)

6

18

(35.29%)

(23.07%)

36

Total 55

15

25

A Study on Spending and Saving Habit of College Students. Figure 3.22 FEMALE

MALE

23.07%

SPENDINGSAVING 41.17%

INTERPRETATION: The above table and figure shows gender wise spending and saving status of students. About 41.17% of male students and 62.82% female students have spending more than savings. About 23.52% of male students and 14.10% of female students have an equilibrium position that spending is equal to savings. About 35.29% of male students and 23.07% of female students spend less than their savings.

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A Study on Spending and Saving Habit of College Students.

DURATION OF SAVINGS (EDUCATION WISE) Table 3.23

Class

UG

PG

Total

Percentage

Less than 1 year

13

13

26

27.36%

1 – 3 years

21

16

37

38.94%

3 – 5 years

5

3

8

8.42%

More than 5 years

7

17

24

25.26%

Figure 3.23

25 20 15 UG PG

10 5 0 Less than 1 year

1-3 years

3-5 years

More than 5 years

INTERPRETATION: The above table and figure shows the duration of savings of UG and PG students. About 27.36% of students save for less than 1 year. About 38.94% of students have been saving money for 1 – 3 years. Some of the students have 38

A Study on Spending and Saving Habit of College Students.

been saving since 3 – 5 years and about 25.26% of students have been saving for more than 5 years. 13 students in UG and 13 students in PG have savings for less than 1 year.21 UG students and 16 PG students have savings for 1 – 3 years. 5 students in UG and 3 students in PG have saving for 3 – 5 years. 7 students in UG and 17 students in PG have savings for more than 5 years.

DURATION OF SAVINGS (GENDER WISE) Table 3.24

Class Less than 1 year 1 – 3 years 3 – 5 years

More than 5 years

Male

Female

5

21

(25%)

(28%)

8

29

(40%)

(38.67%)

3

5

(15%)

(6.67%)

4

20

(20%)

(26.66%)

39

Total 26

37

8

24

A Study on Spending and Saving Habit of College Students. Figure 3.24

40 35 30 25 20 15

Male

10

Female

5 0 Less than 1 1 - 3 years year

3 - 5 years

More than 5 years

INTERPRETATION:

The above table and figure shows gender wise duration of savings. About 25% of males and 28% of females have been saving for less than 1 year. 40% of male and 38.67% of female students have been saving since 1 – 3 years. About 15% of males and 6.67% of females have been saving for 3 – 5 years. About 20% of males and 26.66% of females have been savings for more than 5 years.

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A Study on Spending and Saving Habit of College Students.

GENERAL OPENION ABOUT SAVINGS AMONG COLLEGE STUDENTS

Table 3.25

Total

Percentage

Increasing

28

28%

Decreasing

37

37%

Don’t know

35

35%

Figure 3.25

INCREASING 28%

DON'T KNOW 35%

DECREASING 37%

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A Study on Spending and Saving Habit of College Students.

INTERPRETATION: When analysing the general opinion about saving among college students 35% students don’t know about the importance of savings. 28% of students have increasing opinion about savings. Most of students don’t know about the importance of savings.

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A Study on Spending and Saving Habit of College Students.

CHAPTER 4 FINDINGS AND CONCLUSIONS FINDINGS OF THE STUDY

Data were collected from 100 samples, based on convenience sampling and the observation based on the analysis of the data, are presented: 1. Among UG and PG students, most of them have income from pocket money. In gender wise classification, both males and females meet their expenses by using pocket money.

2. Only a small percentage of students earn money through part time or weekend jobs. A minor portion of students get scholarships and grants.

3. Majority of our respondents get less than rupees 500 per month. There is only a minor portion of them get more than rupees 2000 per month.

4. When study the spending habit of UG students, we find that their major spending segment is shopping. Shopping of branded lifestyle products and accessories are taking first position in their spending.

5. When we consider PG students, both males and females prefer studies and tuition as their highest spending area. More than half of our respondents are females and they marked that their spending is mainly concentrated in the area of studies and tuitions, but the male students prefer entertainment as their highest spending area.

6. Majority of students in both UG and PG have savings. Most of them prefer bank deposit as their interested saving avenue. In gender wise classification,

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A Study on Spending and Saving Habit of College Students.

most of the male and female students have savings.

A minor portion of

students do not have savings.

7. Most of the students in UG and PG save less than 500 rupees per month. When we consider gender wise, the study shows that male and female students have a savings of less than 500 rupees per month.

8. Most of the students prefer savings bank deposits as their savings avenue. Both male and female students are also interested in savings bank account. 9. Post office saving and chit funds have an equal role in the saving habit among college students.

10. Only a small portion of students have regularity in their savings most of the students save irregularly. When we consider male and female separately, about half portion of male students have regularity in savings.

11. In the case of female students, only a minor portion of them have regularity in their savings.

12. Most of the students in PG save their portion of income as a habit. But in the case of UG students, they save money for the purpose of future studies. While classifying gender wise purpose of savings both male and female students save their money as a habit. Most female students in UG and PG are interested to save money as a habit but some of them save for future studies.

13. Most of the students in UG and PG have similar spending and saving status. That is every one save less than they spend. The gender wise analysis of students shows that both male and female students spend more than they save. 14. The duration of savings of students in UG and PG are 1 – 3 years. About onefourth of students save for less than 1 year. Female and male students are also 44

A Study on Spending and Saving Habit of College Students.

interested in medium term savings. Only a minor portion of them save money for long team.

15. The general opinion about saving among college students shows a decreasing trend. Only a small portion of students have knowledge about th youth savings.

SCOPE FOR FUTURE STUDIES

The study and finding observed therein consider 100 students in two educational categories. The sample size can be expanded and the study can be expanded to different categories including higher secondary and high school level. Also a study can be carried out for those students who have got employment because the spending pattern may be drastically different for a youth whom earns money. It can be further studied that whether spending habits change after getting job or employment or not. Spending and savings habit of adults i.e. above 30 years of age is also an interesting area for study. It may be significantly different from youth.

CONCLUSION The study conducted on “The spending and saving habit of college students” was undertaken to know the spending and saving habit of college students. It was found that most of our respondents spend more than they save but their spending avenues are different. Most of the students have savings and they know about the importance of savings. Students commonly prefer saving bank account as their saving avenue and post office savings and chit funds are very popular in female students. Students save as a habit and a small portion save for their higher studies. From the study on spending pattern of students, male students are spending higher amount in entertainment, shopping and transportation. Female students mainly spend in the area of studies and tuition fees expenses. 45

A Study on Spending and Saving Habit of College Students.

From this, we conclude that the students have savings but they spend more than they save and the students are not aware about the importance of savings.

BIBLIOGRAPHY BOOKS: 1. Peter S Rose, Money and Capital Markets, McGraw-Hill Publication, 6th Edition 2. Dr. A P Philip, “Capital Market & Investment Management”- 4th Edition, Sobha Publication Changanashery. 3. E Gordon, P K Gupta “Banking & Insurance” 4. S.N Maheswari, S K Maheswari, “Banking Law and Practice”. Kalyani Publishers, New Delhi, 13th Edition, 2010 5. Neelam C. Gulati, “Banking and Insurance”, Excel Books, New Delhi 1st Edition 2011. 6. Abhijeet Birari & Umesh Patil “Spending & Saving Habits of Youth in the City of Aurangabad” The Standard International Journals (The SIJ), May 2014

WEBSITES: 1. www.mgu.ac.in 2. www.aboutmoney.com 3. www.investopedia.com 4. www.sebi.org.in 5. www.businessdictionery.in 46

A Study on Spending and Saving Habit of College Students.

A STUDY ON SPENDING AND SAVING HABITS OF COLLEGE STUDENTS QUESTIONNAIRE 1, Name: 2, Age: 3, Gender: Male

Female

4, Educational Qualification: a) Graduation

b) Post Graduation

5, Source of Income: a) Pocket Money b) Scholarship/Grant c) Job (part time/weekend) d) Others 6, How much money will you get per month? a) Less than 500 b) 500 - 1000 c) 1000 - 2000 d) More than 2000 7, Please rank the following according to your spending: Entertainment Fast Food Health and Fitness Mobile/Laptop Expenses Studies/ Tuition Fees Shopping

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A Study on Spending and Saving Habit of College Students.

Transportation/Petrol Cosmetics and Beauty care

8, Do you have savings: Yes

No

9, If yes, How much amount you save per month ? a) Less than 500 b) 500 - 1000 c) 1000 - 1500 d) More than 1500 10, In which way you make savings? a) Bank Deposit b) Post office Savings c) Chit funds d) Others 11, Do you have regularity in savings? Yes

No

12, What is your purpose of savings? a) As a habit b) For higher studies c) For future shopping d) Others 13, What is your spending and savings status: a) Spending greater than savings b) Spending equal to savings

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A Study on Spending and Saving Habit of College Students.

c) Spending less than Savings 14, How long have you been saving money for? a) Less than 1 year b) 1 – 3 years c) 3 – 5 years d) More than 5 years 15, What is your general opinion about savings? a) Increasing b) Don’t Know c) Decreasing

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