Schools Over A Good Home — How Lower Middle Class Spends For Tomorrow 

For a large chunk of Indians, ‘where you go to school' is more important than ‘where you live'. As per Home Credit India's ‘The Great Indian Wallet 2025', children's education is the second largest household expense, taking up 19% of the income—over rent which comes third at 18%. Groceries, however, remain the topmost expense at 29%.

“Every rupee that lands in their wallet comes with a quiet set of decisions, a delicate dance between putting food on the table today and building a better tomorrow. Spending on education indicates their aspirations and potential. They are little pockets of wonder,” Ashish Tiwari, chief marketing officer of Home Credit India told NDTV Profit. 

For this ingenious set who watch every rupee, children's education is a higher priority than personal comfort. Education is also a ‘soaring priority' as these expenses have gone up by 34% in the last one year. 

“For these families, spending on education is an investment in dreams, a commitment that often means meticulously stretching every other rupee to create a brighter tomorrow," the study adds, calling them ‘earners, dreamers and doers'.

How Much Do They Earn?

Two-thirds of Indians belong to this class, who earn Rs 33,000 on an average every month. And, around Rs 20,000 flows out, mostly in the form of essentials. 

“In that Rs 13,000 gap lies a universe of dreams, decisions, and delicate trade-offs that define the financial reality of India's lower middle class. For millions of lower middle class Indians, managing their money isn't just a task; it's a daily masterclass in balancing priorities,” the study points out. 

The study had over 3,200 participants across 17 major cities in the age bracket of 18-55 years under varied income groups and professions. 

Living It Up, As Practical As Possible 

This key consumption cohort also spends on entertainment. “There is a misunderstanding that this class lives hand to mouth. But they also spend on experiences,” says Tiwari. The study indicates that they've shifted from impulsive materialism to mindful, aspiration-driven consumption. 

“Local travel has emerged as a key lifestyle upgrade, with 31% of consumers now exploring nearby destinations at least once a month, a trend led by Gen Z contributing 44% to the share of travellers across different generations,” the study says.  

While fashion remains popular, with 39% shopping for clothes and accessories, it has also seen a major 20-point decline from previous levels—indicating a move towards more considered, need-based purchases, typical of people who watch what they buy, and for how much. 

The overarching trends of spending on fitness and OTT apps are also visible with 7% and 6% of them indicating that they purchase them. “These niche purchases signify a deeper cultural shift, where goals are defined less by visible status and more by personal enrichment and practical comfort,” the wallet study says. 

What Is Left To Save? 

As people who prepare for a tomorrow more than others, the lower middle class have a strong desire to save money. Rising living costs are making a dent into these savings, forcing many consumers to reprioritize. 

Only 50% of respondents reported saving this year, down from 60% in 2024. Interestingly, a large number of people—as many as 38%—prefer to save in cash, taking precedence over formal options like bank accounts (24%), LIC (8%), property (7%), and gold (4%). 

“These households navigate narrow margins with the precision of tightrope walkers, balancing immediate needs against future aspirations. They've learned that Rs 13,000 isn't just savings potential; it's an emergency fund, a child coaching class, a festival celebration, and a business idea—all competing for the same space in their wallets,” the report adds. 

Tiwari, too, adds that the cash provides a certain comfort zone, providing ease of access, minimal perceived risk especially in smaller towns. 

Lower Middle Class And Their Loans 

Living expenses are biting a few too, as 12% of study participants said that they are resorting to borrowing simply to cover basic needs, pointing to a fragile financial state. Apart from this, most of these consumers borrow for a variety of end uses. 

“They borrow to buy appliances and utilities like refrigerators, coolers, TVs, mobiles, home improvement and business reasons. They also borrow for experiences like travel etc.,” Tiwari adds. 

While the lower middle class saves in cash, it does not mean they do not embrace the digital way of life. As per the study findings, 63% of consumers believe digital tools have made it easier to pursue their financial goals, with the strongest confidence coming from tier-1 cities like Jaipur (86%), Pune, and Kolkata (80%). 

Even as physical stores remain dominant for apparel and home appliances purchases, online channels are rapidly gaining traction. Online retail payments now account for 51% of transactions (up from 42% in 2024). More importantly, preference for online loan applications is nearing parity with offline at 50%, demonstrating growing trust in digital lenders. 

UPI continues to remain popular with around 80% of consumers now relying on the platform for everyday transactions, as compared to 72% in 2024. Adoption is highest among men, Gen Z, and metro dwellers—especially in Hyderabad (93%) and Kolkata (87%). 

But, as always there is a catch—nearly half of people say they might stop using UPI if fees are introduced. After all, for those who save in cash, and hold money tightly, the convenience of a payment is not worth the fees. 

Katya Naidu is a senior business journalist who writes about equity markets, startups, energy, infrastructure, real estate and healthcare.