The wealth trap: Why most Indians never get rich and how to break the cycle

India, a land of booming potential and a growing elite, presents a dilemma: why do so many Indians struggle to build substantial wealth? Beyond the headlines of soaring fortunes, a silent majority finds riches elusive. Anand K Rathi, co-founder of MIRA Money, says, "Even with India's economic growth, a sizable section of the populace finds it difficult to accumulate lasting riches. Income potential is not the problem; rather, it is the systemic errors, financial illiteracy, and behavioural habits that hinder the growth of wealth."

Understanding this gap and how to bridge it is crucial for individual prosperity and national progress.

Why wealth remains elusive

Several factors contribute to the common Indian's financial plateau:

Limited financial literacy: Money talk is often taboo. "Many lack basic knowledge of inflation, compound interest, or the crucial difference between saving and investing. Money often sits in low-yield fixed deposits or gold, barely keeping pace with inflation, effectively eroding purchasing power over time," says Atul Shinghal, Founder and CEO, Scripbox.

"Make personal finance education mandatory in schools and institutions. Soon, people should follow reliable websites that encourage financial literacy and advisors registered with the Seb," Rathi adds.

Risk aversion and ‘FD mentality’: There's a deep-seated cultural preference for "safety”, primarily fixed deposits. While secure, the avenue rarely generates significant wealth. The stock or mutual funds market, often seen as gambling, is avoided, preventing access to potent wealth-compounding assets.

Rathi says, "To take advantage of liquidity and long-term compounding, limit your exposure to these assets and balance your portfolio with mutual funds, index funds, REITs, and international exchange-traded funds (ETFs)."

Societal pressure and lifestyle creep: Lavish spending on weddings, festivals, and social obligations can drain savings or lead to debt, hindering early investment. As incomes rise, so do aspirations for consumer goods and bigger homes, leading to "lifestyle creep" that consumes surplus earnings before they can be invested.

Inconsistent savings and investment: Saving is often sporadic, not systematic. Without clear financial goals and automated investments, money tends to be spent rather than put to work for the future. "When establishing financial goals, use the SMART framework, which stands for specific, measurable, achievable, relevant, and time bound. This framework helps to guide choices about risk and asset allocation and guarantees investment discipline," added Rathi.

Besides, one must begin SIPs early—even with small amounts. Starting early with disciplined monthly investing can significantly reduce the burden of wealth creation later in life. "Realise that traditional savings often lose to inflation. Your money needs to grow. Gradually embrace growth assets like equity mutual funds (Systematic Investment Plans or SIPs are ideal) and well-researched stocks for the long term. Start small, but start early to harness compounding," adds Shinghal.

No strategy for risk management or protection: Without insurance or backup plans, emergencies like illness or losing one's work might wipe out savings. Experts suggest one must keep an emergency fund that covers six to nine months' worth of expenses and obtain sufficient health and term insurance. Moreover, set up automatic transfers to investment accounts the moment your salary hits. Pay yourself first. "As income increases, resist the urge to proportionately increase spending. Invest the surplus,” says Shinghal.

Acknowledging luck?

As Morgan Housel emphasises, while skill and effort are crucial, luck plays a significant, often unacknowledged, role in financial outcomes. Being born into a stable economy, avoiding major crises, or making an investment just before a boom are examples of good fortune.

Shinghal says, "Recognising luck fosters modesty, preventing overconfidence and providing perspective during setbacks. Since you can't control luck, focus intensely on what you can: your behaviour, your savings rate, your investment strategy, and your continuous learning. By consistently doing the right things, you optimise your position to benefit when luck strikes, or to mitigate its absence."

Achieving wealth in India isn't about overnight success; it’s about a fundamental shift. It demands greater financial literacy, disciplined saving and investing, and a willingness to embrace calculated risks for long-term growth. "In India, earning well is not the problem—what people do with their earnings often derails wealth creation. Too many individuals delay planning, chase trends, or rely on unverified advice. True wealth is built not through luck or timing, but through clarity, consistency, and discipline. The real fix lies in making personal finance as essential as education or health—starting early, investing smart, and staying the course," says Rathi.