Today is World Thrift Day:

Savings - a worthy habit for success in life

By Pramod DE SILVA

There is a common refrain that 'one must save for a rainy day', the idea being that the money you save could come in handy when you face difficulties. Children are usually encouraged to save (via an attractive piggy bank) by their parents and teachers. In adult life, banks are the real-life piggy banks.

Saving is a worldwide phenomenon that has evolved with the concept of formal banking. Banks are centuries old, but the savings movement per se started in the 20th century. It was in 1924 in Milan that the first international Savings Bank Congress was held. On the concluding day of the congress, the delegates decided to observe a World Thrift Day, on October 31 every year. The intention was to make the public aware of the importance of savings. From this day on, savings banks all around the globe have celebrated World Savings Day, as it is nowadays called, every year and it became a fixed holiday on the calendar of all savings banks.

Longer history

Thus the Thrift Day has a longer history than most other international days. The World Savings Banks Institute now represents 940 savings banks from all over the world that actively promote Thrift Day activities. Although all banks accept savings, the most popular choice for savings remains the savings banks. Sri Lanka too has a State-owned National Savings Bank, which actively promotes savings, in addition to the other banks.

Despite the best efforts of banks to popularise savings, there are those who are not very keen on saving as a matter of habit. Saving even a few rupees (or whatever currency you use) each month will lead to a substantial amount in a number of years. It is very difficult to fathom exactly when we would need more money, but it is comforting to know that you can fall back on your savings should that happen.

People save for various reasons - old age, education, foreign travel, to buy goods, houses and lands, illness and hospitalisation and to meet any unexpected expenses. Whatever the aim, savings will never go waste.

There is a notion that only money can be saved in the true sense of the word. On the contrary, thrift can mean a lot more things. When you walk to the junction instead of taking the car, you save fuel. That is a form of saving or thrift. When you look at a brochure online instead of getting down the printed version, you save not only money but also trees. For that matter, even planting a tree is a form of saving - for the future generation.

When you buy a product advertised for Rs. 5,000 for Rs. 2,500, that is a saving. Turn off any unnecessary lights in your home or office - the savings will be considerable. Use cold water instead of electrically-heated water and the savings can be put to some other use. Pick up the phone instead of travelling to meet a person, if that is possible. The list goes on.

Needs, wants

One should also discern the difference between needs and wants and learn to prioritise. I might want an expensive watch, but in reality, all I need is a simple, inexpensive watch that tells me the time. I might want a smartphone worth Rs.100,000 with all bells and whistles, but all I need is a simple phone that enables me to make and receive calls.

It is best to avoid living beyond your means, however tempting it may be. There are certain occasions when you might want to splurge a bit and it is acceptable, for life is not all about money. But it should not become a habit. Thus thrift is not all about the money, but more about living a less demanding, simpler life as well.

Thus October 31 is an ideal opportunity to promote thrift, which must necessarily begin at home. Parents must inculcate the savings habit in their children and set an example by saving for the future. For example, parents can separate different coins into piles and explain their value to young children. They should keep a till at home and put whatever cash gifts the children receive, into it. As the children get older, savings accounts should be opened for them - these accounts automatically become 'adult' accounts when they turn 18.

The teachers should also show their students the value of saving. Some schools have banking units, which enable schools to encourage the saving habit among the student population.

True, the Thrift Day has now been commercialised with the majority of promotional activities being carried out by banks. But the message it gives to the public cannot and should not be ignored.

Besides the activities organised by banks, schools also organise campaigns with the participation of schoolchildren to improve public awareness on saving. Some of the school activities organised in connection with this day are campaigns to promote savings in schools, special courses to educate children on the virtues of thrift and distribution of piggy banks (tills) and savings bank passbooks.

Many events

Through the many events organised on this day, you would not only learn how saving benefits you on a personal level, but also how it helps the economy of a country. A higher public savings rate could improve the standard of living, create employment, increase investment and contribute to economic development. This is amply demonstrated by the fact that developed countries always have a higher percentage of national savings than developing countries. In other words, savings are a vital requirement for the financial stability and economic growth of a country.

The lack of financial resources impacts the growth of a country in an adverse way; most countries seek aid from outside sources as a way out of this. However, national savings are an alternative to this problem and can effectively contribute to economic growth. Such a domestic capital base will help reduce a country's dependency on foreign aid.

Sri Lanka's savings rate, which stands around 18 percent, should be in the region of 30 percent. India has a 20.7 percent savings rate, Maldives 47 percent, Singapore 48 percent and China 44 percent. All Sri Lankans should contribute to increase the national savings rate.

However, one must take certain precautions when saving or depositing money. Obviously, it is a bad idea to keep currency notes at home, but choosing a bank or savings institution can be an even more challenging task. Several bogus 'financial companies' a la Sakvithi and individuals who accepted deposits from the public were exposed recently. They had obtained billions of rupees in the form of deposits from gullible members of the public and later vanished into thin air after swindling the funds.

It is therefore advisable to check whether your preferred bank or finance company has been duly registered with the Central Bank to accept deposits from the public. Such a list is periodically published in the newspapers and one can also inquire from the Central Bank and its branches. As for individuals accepting deposits, it is wise to give them a wide berth. In any case, if an offer sounds too good to be true, it probably is. It is always better to double check before you commit funds.

Different forms

There are other forms of savings as well. Insurance is in a way, a form of saving especially when it comes to life and health insurance. There are some insurance schemes where one gets a lump sum or a monthly payment after reaching a certain age. And it comes to your rescue should the unexpected happen. Again, one needs to read the fine print with all these schemes, as they sound somewhat complicated and could have pitfalls.

Queuing up for banking services

There are other seemingly attractive schemes which one should avoid at all costs. Ponzi or pyramid schemes look very attractive at first sight - who would not like to double or triple their investment(s) with hardly any effort? However, these schemes usually end with your hard earned money down the drain. Participating in these pyramid schemes, an offence under the laws of many countries, including Sri Lanka, inevitably leads to financial ruin. The public should bring any attempts to organise pyramid schemes to the notice of the relevant financial authorities.

The media should actively promote the savings habit among the populace. Many people, especially in rural areas where banks are yet to penetrate effectively, have little or no idea about the benefits of various savings schemes offered by mainstream banks.

Some banks offer mobile services which reach these remote villages to offer banking facilities. All banks should offer similar services to get their participation in national development. The promotion of thrift should not be confined to October 31. It should be a year-round effort and saving should become a lifelong habit passed from one generation to another.

It is never too late to pick up the savings habit, although it is best to practise it from childhood. The world of finance may be very complex, but the savings habit is not. It is the best choice for a more contented lifestyle.