Indonesia's Middle Class Has a New Way to Manage Money Amid Soaring Cost of Living

Economic pressures on the middle class are making households more disciplined in managing expenditures. Rising living costs, income uncertainty, and higher prices for essentials are pushing many to seek ways to keep their finances secure and under control.

Against this backdrop, the ‘kantong’ feature in digital banking services has become a popular solution to help people manage money according to their needs and financial goals.

The middle class plays a crucial role in the national economy. Data for 2024 shows this group accounts for 81.5 percent of total household consumption. With household consumption contributing more than half of Gross Domestic Product (GDP), the middle class is the main engine of Indonesia’s economic growth.

However, economic pressures have led to a contraction in the number of middle-class people. From 57.3 million in 2019 to 47.2 million in 2024. This condition makes people more cautious in their daily spending.

Katadata Middle Class Insight (KIMCI) survey conducted by Katadata Insight Center (KIC) shows the middle class is adopting a range of financial management strategies. The top three habits are planning expenditure and income at 68 percent, separating money for monthly bills and daily needs at 51.8 percent, and recording expenses at 44.9 percent.

In practice, one approach increasingly used is the ‘kantong’ feature in digital financial services. The feature allows users to allocate money into several specific posts, such as monthly bills, transportation, dining funds, savings, and emergency funds.

The feature is now adopted by a number of digital and conventional banks, including Bank Jago, BCA, and Mandiri. A separate KIC survey found that 86 percent of people are aware of the kantong feature, with the majority of respondents saying they first learned about it through Bank Jago.

Not only does it help technically, the feature is also seen as having a positive impact on users’ financial conditions. Nine in ten users say the feature helps create healthier finances by simplifying spending control and savings planning.

Moreover, 96.1 percent say using the kantong feature makes them feel more at ease because financial planning is clearer. Meanwhile, 95.5 percent say budgeting is easier than doing it manually.