How can Asian households plan further ahead?

More than half of people have no financial plan beyond one year.

Households across Asia are focusing more on immediate expenses than long-term financial goals as inflation squeezes budgets, raising questions about whether families are becoming less prepared for financial shocks and retirement.

More than half or 55% of households have no financial plan or only plan up to one year ahead, Sun Life Financial, Inc. (Sun Life Asia) said in a June report.

“Rising living costs are forcing people to rethink how they manage their money on a day-to-day basis, with the price of food, fuel, and household bills placing increasing pressure on budgets,” David Broom, chief client and distribution officer at Sun Life Asia, said in the report.

The survey found 83% of respondents said inflation has made it harder to meet monthly expenses. The share of financially resilient households fell to 25% this year from 32% a year earlier, whilst only 13% said they felt fully secure about their finances, down from 19%.

Shorter planning horizons are also reducing households' ability to withstand income shocks. About 61% said they could not cope for more than six months without outside financial support if they lost their income because of illness or unemployment.

Many are already adjusting their finances. One in four respondents are using their savings to cover expenses, 27% are cutting essential spending, and 10% have stopped contributing to retirement savings.

Separate research in India suggests confidence does not always translate into preparedness. A June report by HDFC Life Insurance Company Ltd. found working women rated their financial readiness at 84 out of 100, whilst their measured preparedness was only 58.

HDFC said women were more likely than men to save for their children's education and home ownership, but fewer than half felt financially prepared for retirement.

“The contribution of working women towards the family is way beyond household income,” Vineet Arora, executive director and chief business officer at HDFC Life, said. They also need to plan ahead for their long-term financial security and retirement independence, she pointed out.

Sun Life also found financial literacy improved resilience, with financially literate households reporting greater confidence, lower stress, and a more positive outlook.

Questions to ponder:

• How can households balance immediate living costs with long-term financial planning?
• What policies could help families build emergency savings without sacrificing essential spending?
• Are people becoming too confident about their financial preparedness without taking enough action?