All You Need to Know About SNBL Way of Managing Money

The practice of saving for the future has been ingrained in Indian society and has been passed down through generations. Nonetheless, due to people's growing desire to live comfortably and fulfil their dreams, the trend of saving has been diminishing in recent years. The "Buy Now, Pay Later" method, which entails using credit cards, consumer loans, and personal loans to finance purchases, is becoming increasingly popular.

Gen Z, who have great aspirations and a strong desire to live fulfilling lives, is the group most affected by this tendency. They may now buy things without worrying about setting aside money in advance due to easy access to credit facilities and flexible repayment options. The downside of this credit-backed consumption approach is that many members of Generation Z do not save enough, which could negatively affect their ability to retain their financial stability.

The lack of financial knowledge and awareness among Gen Z is one of the causes of this trend. They often do not understand the value of saving money or the negative effects of extravagant spending, which can eventually lead to debt and financial strain. This trend has also been influenced by the instant gratification culture of social media, where individuals feel compelled to brag about their purchases and experiences.

While credit can be a helpful tool for managing money, it is crucial to use it carefully. People should try to find a balance between fulfilling their dreams and setting money aside for the future. However, managing money can be difficult for many people, especially for those who have trouble saving. The "Save Now Buy Later" (SNBL) approach, which entails setting money aside for a certain item or goal before making a purchase, is one practical method of managing money. This strategy may be useful in assisting you in reaching your financial goals, such as saving for a down payment on a house or buying an expensive item without going into debt.

India has a plethora of instant credit apps that follow the "Buy Now Pay Later" (BNPL) approach. While these apps seem to be a more user-friendly alternative to credit card payments, they might actually be riskier as they may lead consumers deeper into debt.

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In response to this issue, several innovative Fintech start-ups, such as OmniCard, EasyPlan, Multipl, Hubble Money, and Tortoise, have adopted the "Save Now Buy Later" (SNBL) model. The SNBL approach seeks to offer a similar convenient payment experience as BNPL but without encouraging the use of credit. Instead, it promotes the concept of saving for a specific item one wants to buy from a merchant and then buying it only after having saved enough money for it, which means buying it in the future. This approach can help individuals avoid the pitfalls of accumulating debt and promote a healthier financial lifestyle.

If you want to purchase a new laptop worth Rs 1,20,000 and you can save Rs 10,000 a month over the course of 12 months, you can buy the laptop in a few different ways.

The first option is to choose a BNPL option using a credit card, personal loan, or consumer loan and repay the lender over 10 monthly instalments.

The second option is to put your money in a savings account and buy the laptop when you have enough money (augmented by any interest earned).

However, there is a third option, in which your monthly instalments go to the merchant as an advance payment or sit in an escrow account with a third party, which is specifically designated for purchasing the laptop from a particular merchant. In exchange, the merchant gives you a discount on the laptop's price. When factoring in the merchant discount, your "return" on your savings will be higher than if you had just set aside money in a regular savings account. For instance, users opting for the laptop plan may receive a 10% to 15% discount on the purchase price.

Let's take the example of Multipl, one of the Fintech start-ups based on the SNBL option.

Multipl holds a SEBI Registered Investment Advisor (RIA) license. It enables you to use your funds in two ways. First, you can invest in mutual funds using portfolios suggested by Multipl. Alternatively, you can use the funds as payment advances. In the former option, you can choose merchants and allow them to provide you with offers for discounts, which become valid when you eventually make purchases from them. Since the funds are in your name, held in mutual funds, you can choose to buy from a third party or not buy at all. Multipl also allows you to save money directly with a specific merchant and avail discounts.

However, as a consumer, there are still some risks involved. While the platforms claim that you can change your mind at any time, there is a possibility that the merchant may dispute the discount or not return your money. Furthermore, if you decide to withdraw your money, the platforms do not pay any interest, and you only receive your initial investment back. Additionally, committing to advances for a particular merchant may cause you to miss out on competing deals. However, for individuals who are loyal to certain brands, this approach may be a smart way to save money and take advantage of discounts.

Unlike BNPL, SNPL provides customers with a more responsible and sustainable shopping option. It seeks to establish and maintain good customer relations and engagement through a route that enables customers to save the required amount to purchase their desired product or service.

PersonalFN has developed a tool called SMART Fund Explorer to assist investors and consumers in smart mutual fund investments for achieving their financial goals. The user needs to input their S.M.A.R.T. financial goal, the timeframe for achieving it, the required amount in today's terms, and the investment amount they can afford as a lumpsum or SIP. The SMART Fund Explorer will then generate a plan showing the expected return and investment value at the target date.

Here's how the SMART Fund Explorer looks like after you input the details:

The tool also offers two investment plans, Plan A and Plan B, indicating which fund categories to invest in, the asset allocation percentage, potential returns, and weighted annual return contribution. The user can select a plan based on their risk profile. Signing up to PersonalFN's SMART Fund Explorer also grants access to a list of recommended mutual fund schemes chosen by their research team, enabling a smart start to the investment journey.

To conclude:

The "Save now, buy later" (SNBL) approach is a unique yet responsible way to handle money while still enjoying convenient payments and merchant offers. With SNBL, customers are urged to put money aside for a desired product or service and wait until they have the money to pay for it. This not only reduces the chance of going into debt but also fosters a more sustainable and thoughtful approach to shopping. However,  before investing with any Fintech company, ensure you are aware of any potential risks and drawbacks and thoroughly research the company you are investing with.

KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.