46% lack adequate emergency funds, 60% have low health cover: Report | Personal Finance

Nearly half of the respondents in a recent survey by a fintech firm said they do not have enough money set aside to cover three months of expenses. As many as 60 per cent have less than Rs 25 lakh of health insurance cover for their entire family. 

 

Finnovate Financial Services’ survey also found gaps in savings, debt management, tax planning, investment decisions and succession planning. It suggests that having investments or a financial plan does not necessarily mean a household is adequately protected against financial shocks.

 

Emergency fund remains a weak spot

An emergency fund is meant to provide a financial cushion during events such as job loss, medical expenses or urgent family requirements. However, 46 per cent of respondents said they had less than three months of expenses set aside, or no emergency fund at all.

  

This means a sudden loss of income or large unexpected expense could put significant pressure on household finances.

 

An emergency fund is generally meant for near-term financial needs and should be easily accessible. The amount required will vary depending on income stability, existing liabilities and family responsibilities.

 

Health cover may not be enough

Health insurance is another area where the survey found a significant gap. According to Finnovate, 60 per cent of respondents had less than Rs 25 lakh of health insurance cover for their entire family.

 

The survey also highlighted dependence on employer-provided insurance. While 43 per cent had both employer-provided and personal health insurance, 14 per cent depended only on their employer’s policy. Another 14 per cent did not have health insurance.

 

This matters because employer cover is generally linked to employment and may not remain available after a job change or retirement.

 

The survey said medical inflation in India is estimated at 11-14 per cent, compared with general inflation of 6-7 per cent. This can make an apparently adequate health cover less sufficient over time.

 

Saving regularly does not always mean saving enough

The survey also looked at how much respondents save from their monthly income. Among those who answered the question, 16 per cent saved less than 10 per cent of their income, while 36 per cent saved between 10 per cent and 30 per cent.

 

Another 33 per cent said they saved more than 30 per cent, while only 9 per cent saved more than 40 per cent of their monthly income.

 

Overall, nearly 52 per cent of respondents saved 30 per cent or less of their monthly income. The survey noted that rising lifestyle expenses, debt obligations and long-term financial goals can make it difficult for such savings to provide adequate financial resilience.

 

EMIs can reduce financial flexibility

Debt is not necessarily a problem when it is used for goals such as buying a home or funding education. However, high monthly repayments can leave less money available for savings and other financial needs.

 

The survey found that 57 per cent of respondents had some form of EMI obligation. Among them, 21 per cent spent between 20 per cent and 40 per cent of their income on EMIs, while 9 per cent spent more than 40 per cent.

 

The figures underline the importance of looking at debt alongside savings and investments rather than considering each in isolation.

 

Having a financial plan is only the first step

About 64 per cent of respondents said they had some form of financial plan. However, only 49 per cent said they reviewed their plan regularly.

 

This creates a potential gap between having a plan and keeping it relevant. Income, expenses, family responsibilities, loans and financial goals can change over time, requiring investments and insurance arrangements to be reviewed.

 

The survey also found that almost one in four respondents did not have clearly defined financial goals. Among those who did, 20 per cent did not believe their assets were aligned with those goals.

 

Tax and investment decisions need more attention

Tax planning was another area of concern. The survey found that 29 per cent of respondents primarily wanted to minimise taxes, while 25 per cent relied on their chartered accountant and acknowledged that they did not understand taxation well.

 

For investments, 55 per cent said they researched and made decisions themselves, while 21 per cent relied on friends and family for investment tips.

 

The survey’s findings do not suggest that self-directed investing is necessarily unsuitable. However, they highlight the importance of understanding risk, investment objectives and the role each investment plays in a wider financial plan.

 

Succession planning remains overlooked

Financial preparedness also extends beyond the individual’s lifetime. While 85 per cent of respondents had assigned nominees or beneficiaries for their assets, 15 per cent had either not assigned them or had not updated them according to their current family structure.

 

The gap is wider when it comes to wills. Only 16 per cent of respondents said they had created a will. Among those who had not, 16 per cent believed they were too young to make one.

 

A will can help communicate how assets are intended to be distributed and can become particularly relevant when a person has dependants, multiple assets or changing family circumstances.

 

The survey’s overall finding is that financial security cannot be judged by income or investment value alone. Emergency savings, adequate insurance, manageable debt, clear goals, regular reviews and succession planning all form part of a household’s financial preparedness.