The Middle Path: Savings vs. Consumption

A famous story about the grasshopper and the ant is often told to children to extol the virtues of savings and hard work. The story goes like this: In a jungle, a grasshopper and an ant live as neighbors. The grasshopper believes in enjoying life and living in the moment, while the ant plans and prepares for the future. During the summer months, the grasshopper spends time singing, dancing, and enjoying life, while the ant works diligently to store food for the winter. Yes, WINTER IS COMING. When winter arrives, the grasshopper finds itself hungry and cold, having no food stored up. The ant, on the other hand, is well-prepared and comfortably warm because of its hard work during the summer. The grasshopper asks the ant for help, and the ant does help, but not before reminding the grasshopper of its choice to spend the summer in leisure rather than working. The fable ends with a lesson: it’s wise to plan and prepare for the future rather than relying on luck or expecting others to bail you out.

While the fable teaches valuable lessons, these lessons should be understood in the light of the age-old Indian wisdom: “Ati sarvatra varjayet (अति सर्वत्र वर्जयेत्).” This means that excess in any form should be avoided, as it leads to negative consequences. For example, if you love ice cream but overindulge, your body will suffer. Similarly, while saving is generally seen as virtuous, excessive saving can also be problematic. I recall a news article about a beggar in Mumbai who died with a substantial amount of money. Despite his wealth, he continued to beg daily and never utilized his savings. We cannot take our worldly belongings with us after death; everything is left behind.

Extreme savings can lead to a poor quality of life and result in others benefiting at your expense. For instance, parents often save for their retirement and their children, but their sacrifices may be squandered if their children do not understand the value of hard-earned money. Many rich families experience a loss of fortune because the younger generation knows how to spend but not how to earn. It’s important to ask: what are you saving for? Is it for your goals, your quality of life, or for others? What sacrifices are worth making today for a better tomorrow?

Some middle-class families take saving to extremes, spending more time on chores or making more effort to save money. They often fail to understand the trade-off involved. For instance, spending extra time on household tasks cuts into time available for other activities. This trade-off varies based on your current level of prosperity and priorities. For example, is it worth going to a substandard hospital for an ailment that requires expert attention? Is it wise to opt for unreliable transport when you have an important meeting or a flight to catch?

This doesn’t mean we should stop saving and start consuming more. We all understand the dangers of excessive consumption, even though we may sometimes ignore them. Spending beyond your means invites trouble. With the allure of seductive advertising, resisting temptation can be challenging. “Oh, this dress is available at such a great deal!” or “Let’s buy this big FMCG pack because it’s on discount, even if we won’t use it in a year.” The convenience of credit cards, with their promise of deferred payments, can also lead to overspending and debt. This is why the story of the ant and the grasshopper remains relevant for many.

So, should we consume less and save more? The answer lies in finding a balance. We should save a good portion of our current income for future needs and invest wisely, but we should avoid excessive miserliness.

What constitutes a good balance? Should you save 50% and spend the remaining 50%? The short answer is: it depends on your personal situation, future goals, external environment, and purpose of consumption. For example, an elderly couple whose children are well-settled may not need to save as much, but they should still have enough to cover exigencies, medical treatment, regular expenses, and social obligations. Conversely, a young graduate starting their career should save more for the future while taking care of current needs.

A working woman might find it worthwhile to hire a maid for cleaning and other chores rather than spending time on low-value tasks. This allows her to focus on higher-value work that brings more income or satisfaction. Similarly, a businessperson might benefit from having assistants to handle various tasks, recognizing the value of their time.

Monika Halan, in her book “Let’s Talk Money,” emphasizes the importance of having an emergency fund and insurance as a safety net before pursuing other financial goals. Therefore, strive to build a decent safety net before focusing on discretionary spending.

So, be like the ant: gather a safety stock, and when you have sufficient reserves, take time to relax and enjoy.