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Coming up with a savings plan

Diana M. Moulton

Coming up with a savings plan

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Everyone of us knows about the piggy bank that the little boy or girl has hidden away in some secret place. Many of us are also accustomed to grandpa or grandma pushing away a few dollars in an old mattress or some other unimaginable crevice, where often they are forgotten.   
These cultural methods of saving usually come in handy in cases of emergency but they seldom result in the type of savings that this country needs if Barbados and its citizens are to extricate themselves from the level of poverty that pervades our society today. There is no doubt that we Bajans save, but certainly not enough – not even for the proverbial rainy day.
Savings should be planned, organized, consistent and purposeful. Too much of our savings practices are haphazard and short-term. They do not generate or create the type of wealth that is necessary to set us along the road to riches.  We must have new and more effective ways to save so that by the year 2025 Barbados can boast a financial status comparable to our North American neighbours. This is not an unreasonable expectation, or an unrealistic dream.
In order to create a better culture of savings and investments, we should start with our children. Let us revive and intensify a national schools saving scheme. From birth, indeed until death, every person should put aside a little with long-term goals in mind.
For example, if the Government assists, encourages, monitors and regulates a proper system whereby every child from the early childhood stage can start saving and this is carried forward through the primary stage to the secondary school stage and into adulthood, this country would be much better off in the long run. Far too many of us reach adulthood with nothing but the clothes on our backs.
Far too many of us are totally dependent on our parents well into our 20s and 30s merely because we were never taught to save and invest for adulthood, the critical stage of human development. 
Instead of giving our children lavish birthday parties with lots of goodies, give them a bank account with an established banking institution. In an effort to foster good saving habits, we should also teach them the basic principles of financial management and accounting. 
We also think that people who earn very little cannot save.  Everyone can and should develop a systematic savings plan.  No matter how poor, no matter how challenging the times may be, you must save and invest.  
Again, the financial institutions should educate the public and inform the ordinary man and woman how they can invest in these institutions. For example, credit unions need to do more to attract savings from domestic servants, casual labourers, small traders and itinerant vendors who may think that their incomes are too small to make the sacrifice. 
Another safe and valuable way to save is through insurance. Insurance companies need to reposition themselves and redesign products that would convince the ordinary person that there is wisdom in purchasing an appropriate insurance policy. Insurance is not just protection from accident and injury. Insurance is a safe, sure system of solid, sound savings. 
A good culture of savings and investment requires new thinking from the private sector too. Instead of workers obtaining end-of-year bonuses and annual salary increases, a significant portion of these richly deserved benefits can be channelled into a block of shares for the employees, so that they could have a stake in the company and long-term savings. 
If each employee had a small financial stake in the institution where he/she is employed, he/she would be self motivated to grow the business and make it successful.  The employee who is a part-owner of a company would take greater interest in the affairs of the company to ensure its success.
More and more people are turning to self-employment. Is the Government aware of the serious drawbacks of promoting this sector? Many self-employed people do not have a proper savings and investment plan. Consequently, when these people reach retirement and old age they are likely to be wholly dependent on the Government.  It would be interesting to see what would be this sector’s reaction if the government instituted a compulsory savings and investment scheme to generate a pool of funds for the sector’s benefit in years to come.
Diana Moultonan is an interim member of the Barbados Association of Financial Advisors.