The survey How India Earns, Spends and Saves points out that 58% of labourers and 20% of the salary earners prefer to keep their savings at home. The behaviour with bank deposits follows a reverse pattern.

It also shows that landless households too save. In fact, the landless form the bulk (40%) of the total households in the country but save the least at Rs 7,608 a year, compared with Rs 7,991 a year by marginal landowners, Rs 13,550 by small landowners, Rs 22,317 by medium-sized landowners and Rs 42,490 by large landowners. Another encouraging revelation was that poor households saved despite being in debt.

The survey, conducted in 2005, was aimed at gaining deeper insights into the motives for financial savings, the degree of financial security of Indian households and the degree of sophistication that households bring to bear in their savings and investment decision.

But why do Indians save? While different households had different reasons for keeping away some money as savings -- ranging from emergencies to marriages and social events, children's education and gifts -- saving for old age was not the most important driver for setting aside some cash though India does not have a social security system.

Interestingly, 83% of the households surveyed saved for emergency, while children's education (81%) was the other key priority.

Only 69% households saved for oldage financial security, while 63% household said they kept aside money to meet future expenses like marriage, births and other social ceremonies. Nearly 47% of the households saved to buy or build a house and a similar percentage saved to improve or enlarge their business.

Only 22% of the households saved to buy consumer durables and 18% for meeting expenses towards gifts, donation and pilgrimage.

This also pointed to good business opportunity for banks to meet the growing demand for buying houses and durables.

However, despite a strong savings tendency, Indian households are still vulnerable to any mishaps to their breadwinners. According to the survey, 96% of households feel they cannot survive for more than one year on their current savings in case they lose their major source of household income.

'A country of optimists'

India is a country of optimists when it comes to financial security, said a survey `How India earns, spends and saves' by Max New York Life-NCAER.

The survey found that the optimism was found to be misplaced and indicated that Indians do not make a long term plan of their financial security.

In the survey, 54% of the respondents were confident about their current and future stability. But, when specific questions were asked, it was found that financial optimism was not based on facts, said the report based on the survey.

An overwhelming 96% of households feel that they cannot survive for more than a year on their current savings in case of loss of a major source of household income.

Hardly 1% of the households that depended on labour and agriculture as the main source of income can sustain themselves for more than a year on their savings as compared to 7% for self employed in nonagriculture activities and 9% for regular salary earning households.

Stretching the savings to last beyond 12 months becomes more of a problem for households that are lower down on the education scale, the survey said.

For instance, as in case of labour, 1% households whose chief earners are illiterate can sustain themselves for this period, compared to 2% primary educated chief-earner households, 4% higher-secondary households and 11% graduate or more educated households as chief earners.