How to develop a saving culture

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Photo Cred: Siphumeze Khundayi

Our future lies in the hands of our children. Just like once upon a time we were the future, we have become the present and therefore all responsibility for the sustainability of the Earth environmentally, financially and economically and otherwise will pass to our children. The now is all we have to deal with, and when the future comes along, we will have little role in it. It will then be the responsibility of our children to make the decisions, make exceptions and reservations about the resources at hand. The quality of the decisions they will make will depend on the size of the stake they have in that time.  The size of the stake in that future will be also equivalent to the size of resources that we will bequeath to them and the level of emotional attachment and knowledge they will have to the resources.

There is an urgent need to prepare our younger generation for the task of taking a stake in the future. Now is the best time to correct the mistakes and omissions that the past and present generations have made, it is never too late. Their most important role right now is to learn the ropes of saving and management by doing, being involved and being accountable for the outcomes of the activities they are undertaking.

If children are allowed to manage and plan for the little money that we give them on a regular basis, this should be a good beginning for them to learn the art of managing resources. I am of the view that when their time comes the children should be able to make a psychological shift in their thinking from managing their own little portfolio to managing national or community resources with as much prudence. They would have learnt that resources are for the long term or inter-generational and therefore should be utilised in a sustainable manner. They will also have learnt that resources are tools and not an end in themselves for use at one goal for one purpose. Like money saved, it is not money to be used to buy things, but it is money as a resource that works for you.  Then we will have achieved a fundamental step up to securing the next level.

When a child is enabled through learning and doing, he also learns to make wise decisions. Decisions related to the activities he is involved in. This could be decisions regarding saving something from whatever one earns, and nurtures it and eventually, grows in value. Such a child will immediately be entitled to an opinion on the matter. Saving by nature is painfully slow and also implies that one must forgo the benefits of your money now with the prospect/ belief that in future, things will be better. So we can say that there are 2 lessons to be learnt here.

  1. i) Forgone consumption i.e. the belief or promise of future benefit and

ii Confidence/ patience, while waiting for the outcome to reveal itself (risk management). When the time comes, they will have earned that entitlement through their contribution to the growth and value of that exercise. It would be a very unfair day when a parent completely sidelines a child who will have saved his money to a point where this money must start to work for him and the parent takes this money and walks away without an explanation or recourse. It happens! Similarly, when young people invest their time in acquiring knowledge and skills, the nation has a responsibility to ensure that the art of managing resources is inculcated in the minds of the young ones. Again, it is a sad day when young ones are sidelined for lack of experience from participating in the growth of the resources of their country.

The children will ask what happened.

If such an incident were to happen again and again, (it does) such children will get disillusioned and walk away; never to trust the father or the system again. It is equally disheartening for those parents who bequeath their hard earned resources to children totally unprepared for the task only to squander the resources for lack of knowledge/ skills or commitment. At the national levels it is equally frightening that successive generations have been unprepared to manage the built up and natural resources on a sustainable basis. Both situations are common in history and from now on maybe we can break the jinx.

This brings me to a comment made by Sylvia Masebo one day while being interviewed as Minister of Tourism about our attitude towards our natural resources. She said that ‘…Zambians were not utilising the local natural resources very well. She was worried that the rate at which the resources were being exploited was not sustainable’. She continued, ‘we face a future of extinction of various natural endowments.’ (Zambia National Broadcasting Cooperation)

She made specific reference to wildlife where there was an indiscriminate slaughter of species, some of which are seriously depleted and which, without active management, may actually be wiped out in the near future. She was making reference here to indiscriminate issuance of hunting licenses for hunting of the various species in the wild.

The point is, whether the decisions are to do with conservation and careful management of public resources or building a culture of saving in our children on a private level, we have to be very careful of our own actions. Honesty, trustworthiness, reliability, accountability, consistency, even frugality and commitment are critical. Many of us get excited at the sight of money especially money that does not deem to have an ‘owner’ and the temptation to spend it even to the detriment of a child (whose future should be secured) or indeed squander the money to fulfil our own immediate and short term plans is high. We see this in property grabbing incidences where people who have had no part in building assets and other resources turn up at the demise of the owner, and assume the responsibility of managing such resources. Invariably, the resources large and small are squandered. But the lesson is learnt by the one who is betrayed.

As parents we must walk the talk. If we want our next generation to exhibit strong attributes towards their own growth and development, we have to teach them now and our own behaviours must re-enforce what we want to see in them. To achieve financial freedom and other resource freedoms, we have to intervene. How? We must get involved and influence and complement their decision making. We must ask relevant and probing questions and we must be the ones to initiate and facilitate initiatives that will help our children to transform from spenders into savers.

Practical examples:

How many of us take our children to our places of physical work, like farms and factories where the actual manual work is being done? Do we try to get them involved in the activities of the farm/ factory? I am tempted to ask because many parents these days are involved in weekend farming on quite an impressive scale. Others are building, others rearing goats, chickens running restaurants, salons, all on the side with a regular job. How many of these children are working side by side with their parents and appreciating what the work involves or entails. Getting their hands dirty like delivering manure, eggs or vegetables on behalf of mom or dad, in pursuit of the family wealth are but a few, of some of the things children should be encouraged to do.

Thereafter how many involve the children in counting of the money as it rolls in or accounting for the money for banking or paying creditors? While all that is going on, how many of us counsel or mentor our children to understand why certain things are being done and the final objective to be achieved? This way they may appreciate the whole value chain as opposed to only the outcome (counting the money). I believe such conversations with your child, apart from helping him understand the process, will also help conceive in them a respect and love for hard work and an understanding of the psychology of money and what it takes to make it.

Children will understand how money comes about and how hard do they have to work, for how long and what can money do for them. The dilemma therefore remains: not ‘what can I do with money’ but ‘what can money do for me?’ Note that the money question gives you 2 different thought processes. One broad i.e. ‘what can money do for me?’ and one individual focused: ‘what can I do with money?’

Money Pays the Bills

To pay the bills you need money but that is only part of the story. That is part of the story that most of us spend our lifetime pursuing; making money to pay the bills. The bills come up thick and fast as time goes on which means practically we are always behind the crest. The need to save is relegated to a side show to an ever expanding expenditure pattern. Saving is done after the bills are dealt with. No wonder we can only save so little. To achieve significant savings, the equation must be re-arranged. Savings must come first before any bills are paid. Savings is optional while bills are mandatory on our resources. The equation must change to include savings as mandatory too! This would have a positive impact nationwide. Consider this; Zambia, in the past few years has recorded some impressive GDP growth rates never before experienced. But what is evident is the rate of consumption consumption has also increased. This has left no positive changes in savings. Bills have held us hostage! We want to change this so that we can get the equation straight. Savings must determine how much money will be left to spend!

How do we achieve savings?

Let us make a resolution to start saving. That is the easy bit. Let us also change our behaviour to reflect the new resolution. This behaviour change will definitely include less expenditure and more savings. Let us feel the pain so much so often that we will forget what life was like without the pain. Change the clock and change your attitude. Change what you eat, what you wear. Savers think long term. Change your circumstances, set new goals.

The next step is to question or interrogate the resources under your control; now and in the future for you to achieve the goals.

I said earlier that you can only have control of something that you own or have a stake in. You can only have a stake in the future if you have invested in it. If you are dispossessed for whatever reason, because of mismanagement of your resources or lost opportunities, then you will have no influence or control. Your opinion will not count; your claim will not be valid. Like Sylvia Masebo observed, if the wildlife is dissipated for the next generation, there will be nothing there to claim or influence. It will all be gone.

Lost opportunities, what does it mean?

Each worker whether in the private or public sector has a minimum of at least 25-30 years of work in their lives. Imagine the number of opportunities one has to invest over quite an extended working life. Opportunities for loans, opportunities to take risks while leveraging on the name of the employer or other work related opportunities. By this, I mean banks will only give you a loan or group loan if the employer can guarantee or underwrite the facility. Salaried employees have much more opportunity than they care to admit. Many times these facilities are even at a concessionary rate. Calculated risk opportunities catapult one to try their hand at starting a business sometimes outside their normal areas of strength.

But alas, salaried employees generally are some of the most poverty stricken class of people at the end of the day. In urban high population areas especially, salaried people are targeted for loans and more loans. Many take advantage of these easy facilities for re-current consumption like school fees and very short term uses like car loans etc. Some however have been known to build houses, start small businesses of various types which have contributed massively to their cash flows and general financial well-being.

It can be argued that if one has sight of where they want to be in the future, such opportunities can be used as a road map towards arriving at that ultimate objective. Those that do not have such long term plans may be said to be the ones who end up in a negative cash cycle with loans that create more financial pressure. The difference in both cases is that one has a long term objective to which he also aligns his behaviour and the other has made no such adjustments. Every opportunity comes with it a set of behaviours required that will enable you to achieve the objectives. The desired behaviours include discipline, focus, planning, consistency, frugality and risk management.

The risk of long term plans is that circumstances change in the short term. One must sufficiently understand their objectives to be able to withstand minor disruptions without aborting the whole program. One must be able to change course when circumstances change and re-align plans. Plans do not necessarily work out according to the drawing board so one must have the discipline not to throw the baby with the bath water when plans don’t materialise.

It is the same with the savings function.

When interest rates go down and or inflation is up, the idea is to think creatively and think outside the box. Short of this there is the danger that all the savings will be wiped out in value by inflation. Savings must be evacuated and deposited or invested in assets that will give you positive returns to preserve the original value. In some cycles, the most one can do is just preserve capital.  If one is solely bound to the objective of securing their future they will do their best to ensure that the objective is not dented in a ‘permanent’ way. I say permanent because it is agreed that in the short and medium term, there will always be diversions.

In conclusion, one must not let up in growing their assets in order for them to claim or influence the future. In the same way at national level, we can only claim or influence the future of the country if we invest in it through the proper management of public resources. Without personal or public resources we have no future.



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