Promoting the savings habit

Do you save? Or do you love to spend? There is a special day round the corner that will help you decide which camp you would choose. It is World Thrift Day, also referred to as World Savings Day. Although you can save things other than money, only that option offers a really safe shelter in a financial storm. 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.

Saving is a good habit that must be promoted widely starting from the younger generation. Saving is a concept that is as old as printed or minted money, but it has evolved with the concept of formal banking. As the name implies, savings banks are specialised in this sector of the banking spectrum. In Sri Lanka, the National Savings Bank is a prime example.

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

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 general 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 now called, every year.

Popular

Although all banks accept savings, the most popular choice for savings remains the savings banks per se. Despite the best efforts of banks to popularise savings, there are those who are not very keen on saving as a matter of habit. But this Thrift Day is the perfect opportunity to make a start. 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 objective is, savings will never go waste.

The word thrift does mean a lot more than saving money. When you walk to the junction instead of taking the car, you save fuel. When you phone the pharmacist to inquire whether a drug is available instead of going there by car, you save time, energy and by extension, money. 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.

Turn off unnecessary lights - you can save energy and money. When you hunt for discounts during shopping, that is a form of saving. It need not be confused with leading a miserly existence. There are certain occasions when you might to want to splurge a bit and it is perfectly acceptable, for life is not all about money. In essence, thrift is also about living a less demanding, simpler life as well.

If you want to save, it pays to learn the difference between ‘want’ and ‘need’. I might want a Porsche Panamera, but in reality, all I need is a far cheaper car that gets me from A to B. I do yearn for the latest iPad 4, but all I can afford is a Google Chromebook and I am happy with that. In other words, be happy with what you have - and can afford.

October 31 is an ideal opportunity to promote thrift, which must necessarily begin at home. Parents must inculcate the savings habit in their children. 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. More schools should have these banking units and I hope that our State and private banks will take the cue. 

Schools should also organise campaigns with the participation of schoolchildren to improve public awareness on saving. For example, 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. Cooperative Societies are also in the forefront of saving - there are 6,300 Thrift and Credit Co-op Societies with 1.3 million members in Sri Lanka. They too should expand their activities.

Saving is often thought of as a personal exercise, but it can and does benefit the society as well. Savings help boost a country’s economy. 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.

Precautions

Sri Lanka’s savings rate, which stands around18-19 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 thus contribute to increase the national savings rate.

However, one must take certain precautions when saving or depositing money. 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. There have been instances where well educated people have been duped by bogus finance companies and so-called pyramid schemes. It is therefore advisable to check whether your preferred bank and/or finance company has been duly registered with the Central Bank to accept deposits from the public. Insurance can be treated as another form of saving but here too, it is better to study all the options. 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.

The media should actively promote the savings habit among the populace. Many people, especially in rural or remote 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.