Yet Asians know it’s not enough. Horioka’s own past research has shown the Japanese and Chinese have a strong bequest motive. Indians have an even keener wish. Given the country’s youthful demographics, constrained state finances and underdeveloped pension markets, even limited financial assistance for the elderly may have to be “purchased” by them from the next generation. (That such help won’t be freely given by children is now a well-established fact. Asian family values are no longer as robust as they used to be.)
Perhaps Indians are already strategic with their bequest motive. They aren’t postponing the act of giving to their final years. They’re doing it now. One of the world’s hottest education technology unicorns is Byju’s, an Indian online tutoring company valued at $11 billion after its last financing round. Bangalore-based Byju’s recently paid $300 million to acquire Mumbai-based WhiteHat Jr, which teaches coding to children. For $3,999, WhiteHat promises kids younger than 14 exposure to “full commercial-ready utility apps.”
So this is a form of early bequest. If junior hits upon the idea for the next Facebook or Uber, the parents can retire today. Otherwise, the kid can always go work in Silicon Valley and send money home, grateful for a timely $3,999 investment the parents couldn’t really afford. In either scenario, there won’t be a need to give much more on one’s deathbed.
Glaring wealth inequality makes it risky to bequeath anything more than the family pet in the will. As economists Thomas Piketty and Emmanuel Saez have forcefully argued, inheritance taxes should be 50% to 60%, and even higher for bigger bequests. So the choice is either to spend the money on one’s own betterment, or to give it early to the offspring.
Today’s workers can use the money. They can re-skill themselves to stand up to the robot overlords and stay employed for longer. But spending the same sum on the education of a couple of teenagers may offer superior returns. It may even be the only long-term investment that beats a broad equity index fund.
That’s the retirement plan Indians and many perhaps struggling middle-class people everywhere are on. They just forgot to tell the wealth manager, who’s still shaking his head about how little clients are saving.
Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.