HDFC Life ValueNotes Life Freedom Index

A primary benchmark for indicating how financial free an Indian urban consumer is in terms of her financial awareness, planning, sufficiency, and adequacy of planning

HDFC Life ValueNotes reveals that Life Freedom Index at 58.3 on a scale of 0-100 shows that Indian urban consumers’ current sense of financial freedom is low and is yet to reach a state of financial nirvana. The lack of financial freedom can be attributed to many factors - low financial awareness, inadequate planning and a general feeling that they need to do more to increase their financial sufficiency and adequacy. While chalking out their financial plans, Indian urban consumers give highest priority to expected events such as child’s education, dependent’s marriage, retirement, etc. While unexpected events such as accident, death or natural calamity rank second on the list of priorities, external factors (inflation, regulations, and interest rates) are given the least importance. The survey findings reveal that only 30-36% consumers take into account inflation during financial planning. The overall Financial Awareness Index for Indian consumers’ at 43.3 on a scale of 0-100 denotes low level of financial awareness. On event awareness, Indian urban consumers’ score at 28.2 is poor, while product knowledge (58.3), though significantly higher, is still low and needs considerable improvement.

The Life Freedom Index is made up of five sub-indices:

• Financial Awareness Index: Captures the financial product knowledge and the awareness level of events (expected, unexpected, and external factors) that can have a significant impact on current and future financial needs of Indian urban consumers.
• Financial Planning Index: Reflects the existence of a comprehensive financial plan, which is regularly reviewed and realigned to address evolving financial needs.
• Financial Sufficiency Index: Reflects the state of Indian consumers on the sufficiency of their financial plan to meet immediate financial needs.
• Financial Adequacy Index: Reflects the level of confidence of the Indian consumer’s financial management practices being adequate to live life with dignity, independently and meet the desired standard of living throughout his lifetime.
• Financial Liberty Index: Reflects the psychological feeling of ‘Financial Freedom’ and ‘Financial Security’ of Indian urban consumers.

These five sub-indices together measure the state of finan¬cial freedom of urban Indian consumers across four consumer segments all of which fall under the Socio Economic Classification (SEC) groups A and B:

• Chief Wage Earner: A person who contributes the most to the household income and is the key financial decision maker of the family, in the age group of 30 – 45 years
• Wisdom Investor: A person who is aged 45 years or above
• Young Aspirant: A person who is aged 20 to 30 years
• Urban Woman: A woman aged 25 to 40 years

  The report is available for your perusal below.