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According to a research from The Economic Times, 31% of the Indian population comes under the middle class category in 2023 and it will increase to 38% by 2031. The middle class is the fastest growing Indian population, growing at 6% per year. We didn’t get here overnight. During Independence we had only 12% population in this category. We have grown looking at our parents and grandparents, their lifestyle and financial leverages. Have you ever noticed how, even when household incomes are tight, our families still manage to provide for basic needs? Why do they prefer doing all kinds of work themselves, even when it costs them time and energy? Yet, they sometimes end up losing money in phone or bank scams or even spending lavish amounts of money in Indian weddings and festivals. As the middle class grows, so too do the challenges of managing finances wisely. This is where the concept of being ‘penny wise, pound foolish’ often comes into play. Let’s dive deeper into the topic.

Definition

The phrase “Penny wise, Pound foolish” refers to a situation where someone is careful with a small amount of money but makes poor decisions and ends up spending more without realizing. It highlights the irony of focusing on minor savings while neglecting bigger expenses or long term consequences. 

If we peek into our own window we will find tons of examples in our own household itself. Parents going to buy vegetables or using auto rickshaws, doing daily house chores by themselves or saving in bank accounts, we can see them in our day to day lives. If we argue with them for their bargaining skills or we try to educate them on the essence of investment, we would listen to the dialogues, “We built this house brick by brick because of savings we did, today’s generation will not understand this” or “today’s generation become lazy and likes to slack”. 

Let’s explore how this concept plays out in various aspects of life.

Real Life Examples

1. Cutting employee benefits to save costs.

In the corporate world, a lot of companies may be a MNC or a start up, focused on making profit on the verge of sacrificing employee benefits. For example, not providing proper insurance to the employees and their family members or giving false promise of hike and bonus each year or not giving proper vacations in the name of work – all these may help company to save some amount of money in the current financial year, but in a long term employees will get frustrated and prefer to leave the company for better opportunity. Companies that neglect long-term employee welfare may face high turnover and decreased morale, ultimately costing them more in recruitment and lost productivity. Instead the companies which focused on providing good care and benefits to the employees, prospered more in the long run. You might have heard companies giving cars to their employees during Diwali as a gift is one such example. Not all the companies can afford to give cars as gifts to boost employees. What I am trying to say is a small token of appreciation is what anyone needs to improve productivity.

2. Neglecting permanent income sources while giving more attention to the premature side business.

During the pandemic, when Work from home culture started, people got more time in their hands. So instead of focusing on one company, people started working for multiple companies at the same time which violated the legal term the employee and original employer had. The technical term for this is called “Moonlighting”. When they get caught they lose all of their jobs and fall into legal action.

3. Saving in banks accounts for the fear of market crash and not understanding the inflation rates and benefit of investment.

Though the investment was introduced during British Raj in India, it got more popular after the Harshad Mehta scam. People get to know about the existence of stocks and investment. New financial derivatives like SIPs, bonds started after the 2000s. Before that people liked to keep money in banks, post offices and LICs. Average inflation rate in India varies from 4% to 6% and basic interest rates in banks vary from 2.5% to 4%. So basically we are losing money every year if we simply keep it in bank accounts. But this loss is not widely visible until one does a calculation. But the profit and loss in the stock market is widespread and instead of focusing on the positive side of it people only consider the market as risky and usually hesitate to invest. While savings accounts offer safety, yet they can’t outsmart the inflation rate and money can lose value over time. Investing in stocks might seem risky at first, but provides better return in the long term.

4. Saving penny by penny for a longer time just to spend them all on an online gaming platform or fall prey to the online scams.

I remember my childhood when I was introduced to saving by using a clay piggy bank. I used to save 1 rs or 2 rs coins almost daily until the piggy bank got full and I could buy something nice for my use of the money. This habit is still there when I think about saving a very small amount in my day to day life and I bet others can relate the same with me. But older days were different, where we could actually spend that money on something useful. Now in the world of technology, there are a variety of online games, platforms available which are prompting users to spend money to earn some big amount at a time. Kind of gambling. The innocent people think of getting free money and spend all their hard earned savings into them, not knowing the consequences. They don’t learn lessons as well. Even if they lost all the money, still they save just to lose them all again in the process. This is a never ending process and greed.

5. Bargaining in small vegetable shops, but buying items recklessly online during amazon great Indian sales or flipkart big billion sales.

Recently I read a joke somewhere. A teacher asked the students, “Name a festival that you celebrate every year with great enthusiasm and passion”. One of the students answered “Amazon’s great indian festival”. Student Rocked, Teacher Shocked. 

Jokes apart, these online shopping platforms are very popular among each and every category of people. We can buy anything and everything without going anywhere. We see price tags and see offers and buy a lot of stuff, even if we don’t need them. We think about future use cases and buy today. These are pure waste of our savings and money. We proudly spend more thinking that we are getting a good discount, not understanding the marketing strategy even if we don’t need the product. But if we go to the small roadside shops, for a small product also, we bargain just to save some savings.

6. Not giving training to employees but suffers from inefficient and lower productivity.

Everyday technology is changing and new innovations are taking place. AI has been introduced everywhere and robots are on the verge to rule the world. In this situation, if we won’t keep up to the change, we are already dead to the expanding world. Do we need dead employees in our company ? No right ! Companies should motivate their employees to stay updated with the technologies and should provide training whenever possible. This will help employees to survive the exponential growth in technology and It can help increase motivation, productivity and a healthy work culture.

Conclusion

I definitely respect our parents’ choice and their way of living a simple yet honest life. Saving small amounts to fulfill a big dream is definitely one dream that every household has. Instead of losing all the precious time foolishly, one should focus and utilize time wisely. Because money can come and go, but time is constant and will never wait for anyone. While saving in small amounts is crucial, it’s important to strike a balance by investing in things that matter most—whether it’s health, quality time, or financial education. Being smart with both pennies and pounds is the key to long-term well-being.