Youngsters forego saving for spending
Many young Vietnamese are willing to spend the higher incomes they now earn rather than save.
When he was 28, Mr. Quoc Bao, a teacher, bought a new motorbike at a time when most people still rode bicycles. He saved for many years and considered it something of an achievement. He continued saving throughout his life, to buy a house and cover any future medical bills. Thirty years after buying his motorbike, Mr. Bao’s 28-year-old son, Mr. Anh Quan, has no savings at all despite working for several years as a graphic designer and earning much more than his father ever did. His bank account is empty because he prefers to take a holiday every year rather than save for a rainy day. Like many in the younger generation, Mr. Quan doesn’t follow the traditions of the older generation when it comes to savings and is instead willing to spend his salary almost as soon as he earns it.
Preferring to spend
In 2016 and many years before, the proportion of Vietnamese who put their idle money into savings accounts was the highest globally, at 78 per cent, according to Nielsen’s Consumer Confidence Index report. Southeast Asia was also among the world’s most avid savers, with more than two-thirds putting as much as they could away every month. The global average was 52 per cent.
Just a year later, the rate of Vietnamese with savings had fallen to 66 per cent, with the country being usurped by the Philippines, with 69 per cent, Thailand and Indonesia 68 per cent, and Singapore 67 per cent.
After covering the cost of living, consumers in Vietnam are now willing to spend rather than save. Travel tops the spending list of 44 per cent of people, the Nielsen report revealed.
Local tour operators confirm that the number of Vietnamese travelling has increased in recent years. There were 73 million domestic travelers in Vietnam last year, up 20 per cent against 2016. Outbound travelers were even higher, accounting for 50-60 per cent of all people taking trips. Some 6.5 million Vietnamese took overseas holidays, up 15 per cent year-on-year, according to the latest data from the Vietnam Tourism Association. A report from Mastercard forecasting the future of the outbound market in Asia-Pacific during the 2016-2021 period showed that Vietnam will take second place in the region in terms of annual growth in outbound tourists, at 9.5 per cent each year, behind only Myanmar (10.6 per cent).
Travel is one of the best ways to enrich knowledge and life experience and something people should do when they are young, Mr. Quan believes. He has taken many road trips around Vietnam since his university days and also seen a lot of Southeast Asia. He plans to make it to Japan, Europe, and the US sometime soon. “My father was married at the age of 25 and has never been out of Hanoi,” he said. “He tells me to save for the future but I’m still young and single so I want to enjoy the moment. I want a more colorful life. The world is big and beautiful.
Every destination gives me new experiences and something to think about. It’s more valuable to me than a car or a house.” He will save when he’s older and ready to settle down, he added.
Travel is also good way to relax and enjoy life after working hard, according to Ms. Truc Quynh, a 33-year-old employee of a local bank. She used to put all her idle funds into a savings account but in recent years decided to spend more on travel. Every three or four months, she and her husband take their two sons to famous destinations both inside and outside of Vietnam. “The cost is not small, at about $1,000-$3,000 each trip,” she said. “But it’s worthwhile for us to spend time together and have fun. My kids love it.”
Spending on enjoying the moment and upgrading the quality of their life rather than saving for the future is a common view among Vietnam’s young. Others items where people spent their money included clothes (36 per cent), new technology (31 per cent) and entertainment (32 per cent), while 28 per cent of people purchased premium health insurance packages.
Ms. Thanh Nhan, a 25-year-old office worker, usually spends one-third of her monthly income on shopping. Like many women, her favorite products are clothes, bags, and shoes. “I know it’s quite a lot of money,” she acknowledged. “People say you should only spend 10 per cent of your income on shopping. But I think it’s good to spend some money after earning it. It’s like a reward. Dressing nicely also makes me confident and happy.” Another factor encouraging her to shop more is the appearance of good designs and brands in Vietnam over recent years.
The willingness to spend to enjoy life is also reflected in entertainment spending, with wining and dining being the most popular form. Known as a street food country that has also imported famous dishes from countries such as Japan, South Korea, the US, and Europe, Vietnam offers a broad array of options to fill the stomach. Restaurants, bars, and pubs have boomed in big cities like Hanoi, Ho Chi Minh City, and Da Nang in recent times.
Once a week at least, Ms. Hong Nhung, a 33-year-old accountant, takes her family out for dinner. Her kids love KFC and King BBQ, which she joked costs her most of her savings. “There are not many things to do in the city, especially for kids. We all love food so it is our greatest form of entertainment,” she said.
A survey by Statista, an online statistics, market research, and business intelligence company, revealed that Vietnamese spent VND8 trillion ($354,000) on snacks in 2017, while another 2017 report on the consumption habits of Generation Z, born from 1995 to 2010, from Decision Lab, an agile data-driven research agency based in Vietnam, shocked the public by claiming VND13 trillion ($575,000) was spent by Vietnamese each month on small food and beverage items. Around 14.4 million people are in the age bracket, of which 56 per cent have no income or earn less than VND3 million ($133) a month, but each spends an average of VND900,000 ($40) on small food and beverage items monthly.
The report also identified changes in eating habits among this group compared to the previous generation, which is partly due to their adaptation to modern lifestyles. For example, they prefer fast-food more so than street food and may eat at any time of the day, while other age groups tend to eat at a fixed time and at home. The favored drink of the younger group is milk tea (with 53 per cent drinking it at least once a week), while coffee and beer are preferred by the previous generation.
Change in consumption habits among Vietnamese is due to higher incomes and living standards, which stimulate spending demand, Mr. Vaughan Ryan, CEO of Nielsen, told a CEO conference on Vietnam Economics and Potential. As the family model in Vietnam is also changing, with more young people moving away from the family home, spending is becoming more for the inpidual than for the family, as previously.
In the age of technology, the appearance of new retailers and booming online trade also promotes consumer demand and makes it easier for people to buy whatever they want. Economists predict that people will spend more to satisfy their personal needs, especially entertainment and education, in the future. There will also be greater opportunities for the providers of high-quality cosmetics and organic food as well as spa services.
Many people are also more willing to borrow money in order to spend. Credit growth in Vietnam rose 60 per cent last year and is expected to increase 30 per cent every year over the next three years, according to a report from Viet Dragon Securities (VDSC)./.
VNF/Vn Economic Times