BY MAXWELL SICHILONGO
SAVING is a process or action of setting aside a portion of current income for future use, and this demands discipline and consistence. It is a must that one saves as they cannot predict the future. Saving helps us become financially secure and also provide safety nets in cases of emergencies.
However, savings has various definitions according to sector, but all in all, it is the setting aside and preservation of excess income over consumption expenditures to avoid future dangers.
This is an act of economising and according to experience; one needs not only to save when they have plenty, but save from whatever income they may have at any particular time.
Just as it was before industrialisation, saving is a matter of life and death, as it determines one’s life now and later. We all have no option, but to start saving and investing from whatever income we get for the betterment of our families and future.
In life, we will always encounter the battle of choosing from a wide spectrum of items to spend on, that are wants and the needs. The wants are too enticing, luxurious and not easy to shed off as many people fail to distinguish the “wants” from the “needs.” The problem that we make is that we feel strongly that we deserve both. This is a total self-lie that directs us to our destruction.
It is common in Zambia to find someone with a net monthly salary of K5, 000.00, renting a house for K3, 000.00 or more per month. This is mind boggling to understand how such a person and his/her family survives the months considering all the other expenses they need to cover between the first and the last days of the month. It is absolutely clear that the sense of saving and investing is none existent in such a person as he/she lives beyond his/her income.
Considering the case above, a smart person would commit a reasonably smaller amount towards their rentals i.e. up to K1, 500.00 and also a K1, 000.00 towards a savings account or loan that could give him/her an opportunity to buy a plot and start building.
Alternatively, some could just out-rightly commit up to K2, 000.00 towards a mortgage (housing loan) and avoid rentals all together. This is one form of saving that would help Zambians under “Rent-to-buy basis.”
The problem is that we want to live big even before making it. Also it is time the government introduced “The Rent-to-Buy” mortgages as more than 60 percent of formally employed people qualify.
It is unacceptable in this era why one should rent a house for 10 years or more and just leave it when the chips are down. Averagely, monthly rentals of K1, 500.00 are sufficient to be converted into installments for a mortgage. Think about this!
Without arguments, money matters are the leading causes of stress and deaths world over. In Zambia, this worries us more than work, family, and even our health; as we learn the balancing act of safeguarding our future. Unfortunately, this will only be achieved by saving, whether nationally, company level, family and last but not the least, at individual level.
A country or company or individual without adequate or some reserves is dead as the Dead Sea. Finance-related stress isn’t just aggravating; it has actually been linked to negative effects on health and longevity, and is also believed to contribute to poor decision-making.
Statistically, it is unfortunate to note that so many of us are succumbing to money-related stress without taking action at all. These shortcomings are often related to our saving habits. We spend too much and save too little, or don’t save anything at all.
I was delighted on March 21, 2019, when I met Mkwenlenganya Besa, a Grade 12 pupil at Wusakile Secondary School just after making a presentation on Financial Literacy. This boy sells “max cool” or “freezits” and every week he makes a profit of K24.00 from an investment of K36.00.
He pays K5.00 towards his weekend extra lessons and saves K19.00 for business expansion and emergencies. This boy asked me how he could start saving after hearing me talk about “saving and investing.”
This deeply touched me because Mkwenlenganya was already practicing saving and investing, despite not having an account. The fact that he could pay for his weekend extra lessons and set aside an amount from his profits without bothering his parents; truly he is 100 per cent saving and investing.
This boy is destined for better things as I could see how focused and passionate he is about business and finance management. I will be helping this boy to open a minor account with my institution so that now he could practice safe saving.
It is also worth knowing why we save and invest. There are basically three major reasons why people need to save and these are; saving for current spending, saving for emergencies and saving for retirement.
Saving for current spending:
This type of saving covers a period of one month. People who work for a salary should not spend their money before receiving value. It is unfortunate that people spend what they do not have and later encounter difficulties to save as their entire pay goes towards debt servicing.
This also affects people in the informal sector who need to develop a habit of daily or weekly saving so that they do not struggle to cover their monthly expenses.
Kudos goes to people in the informal sector who now know how to save for their monthly expenses and emergencies using Savings and Mobile Money accounts.
Saving for emergencies:
This type of saving goes beyond a month and covers expenses like medical, funerals, loss of employment and others. It mitigates against unforeseen circumstances and financial shocks that could be detrimental if finances are not available. So to avoid sliding into debt, one needs an emergency fund.
One needs a savings account that is not easily accessible, a mobile money account, a small back-up fund that is kept at home etc, as fallbacks. You do not need to keep a lot of money under this fund as also the size of one’s family matters.
Saving for retirement:
In Zambia, this covers the time after our working life; which was at 55 years, but now extended to 65 years. It is crucial that this time is planned for while one has the energy to work to avoid stress, destitution and even early death shortly after retirement in some cases.
It calls for sacrifice and full commitment to save reasonably enough. Forms of retirement savings are many and these include; contributing towards a pension scheme, contributing towards social security, opening a long term savings account, opening an insurance policy, investing in real estates, and many others. “Here, one cannot afford to blink, you blink you crash!”
Finally, they say, “Wealth consists not in having great possessions, but in having few wants.” This is not a hidden secret and all of us need to forego our many ‘wants’ to live a better life by saving for our future.
*The author is a Branch Manager at Zambia National Building Building Society – Kitwe and an Associate Member of The Zambia Institute of Banking and Financial Service.
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