• Saturday, May 25, 2024
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BusinessDay

Savings culture, wealth and pensions

Why you should start saving early

Savings is difficult in a weak economy. Inflation drains the buying power. There is then not enough to save. Yet, the future is bleak without a good savings culture. No meaningful capital projects will take place on an individual, group or national level.

Like a country without cash reserves, or depleting funds will continue to have its rating drop. You would have situations where recurrent expenditures leave no space for capital expenditures. All infrastructures would gradually collapse – personal or national.

Some years back, though my salary was fair, I still could not save. I am the first born in my family. It was difficult to save. Most financial cases were referred to you as a family. You had to deal with them. I resorted to “paying for my savings”. My bank offered what it called “SALAD”, salary advance to salary bank account owners. I took it, paid it off every six months, and invested in other assets that now have better value, today.

What is the essence of this story? Savings culture is strongly related to wealth creation. Pension is one of the world’s best savings cultures. Civilized countries have deeply rooted pensions into their social welfare and development plans. Their aged and retiring ones look forward to going on safaris, adventure and a new life.

Wealth creation comes with good planning. It cannot be a whimsical attitude to life or casualness. It is neither good for individuals nor the government to hold a casual and or uninformed position on this important subject. It cannot be guided by mere sentiments of ill-informed and incoherent positions of the everyday person, with poor knowledge of financial dynamics and implications. When a blind person leads another blind person, they will fall into a pit or walk into a moving trailer on the expressway.

Pension and pension plans are great stabilizers for the mind of workers and a steady development tool for the future for all. Protecting the fund becomes an imperative! Decimation of it will be a disservice to everyone. It is tantamount to a felony.

It is not a plan to cede out to the employer, government or anyone alone and go to sleep. Though, by our culture, we have not been so casual. Just that our approach appears to become anachronistic. Our traditional pension plans have included expecting family inheritances, having male children to fend for the family at old age, having many children, building homes for rent, for the ladies, it seems to be getting married, among others.

Read also: Fear grips pensioners in Kogi as government embarks on selective payment

While these have roles to play in retirement plans in some ways, they no longer fit directly into modern society business environments. It is no longer economical to have many children because of the cost of education.

The ladies work now and either choose or by circumstances remain single and need the benefits of old age welfare plans; Jobs are also no longer guaranteed for the children, among others.

PERSONAL PENSION PLANNING TIPS

Self-development and career growth: You have to grow in your career. Continuous self-development for knowledge, certificates and adding value to your employer is necessary to build a good pension for yourself. Lackadaisical attitudes to self-development, not being visible and adding value to the employer’s business is self-defeating. You are the only direct loser. Do not wait to be trained. If you cannot invest in yourself, who then should? Knowledge is power. You will stand out, your salary will grow, your pension will grow faster with “fatter” salaries. Its compound interest growth will be amazing in more leaps and bounds. Other growth benefits all add up as well. The longer and weightier contributions you make over time, the better.

Learning investment for alternative income early. This might come as a simple hobby developed into good business. As our career starts to stabilize, we need to think of related alternative or complementary legitimate income. This helps with increased disposable income, and increased savings capacity. As you retire, you need something already familiar and ready to keep your mind working and healthy. Retirement plans are holistic for good health. Obviously, this must not distract you from the main job if your income is not heavy enough to deserve all your attention. Staying idle and waiting for retirement money is a worse crime.

AVC – additional voluntary contribution. Having free cash and ‘killing’ it is exciting. But beware, someday, you may be needing this loose cash. These loose cash can turn into millions of Naira over some years, if put in them in the right place. In addition to your statutory contributions, you could decide to make your own additional savings by instructing your employer to deduct at source a certain amount to your pensions out of self-disciplined savings or savings of loose cash that will not hurt anyway. The truth is that it is investment-cum savings.

You can save toward the target date allowed by law even before the retirement date on a compound interest basis. The returns are higher and more stable because the investments are fairly distributed to avoid wide fluctuations of economic factors. You could use the accumulation to serve as your lumpsum, to avoid touching the statutory contributions for higher monthly income at retirement. So, you do not have to ask for your lump sum. Older years may require more cash for health-related matters.

Plan from day one on the job – do not wait till age 40. At between ages 40 – 50, you are in the third/fourth quadrant of active life. That is when you start consolidation, not planning. At this time, we may enter panic mode if we were just waking up, so to say. you do not have much time anymore. If you are likely retiring at age 60 with a good plan, panic attacks and panic mode will not set in. We would age gracefully and happily because you have provided answers earlier in life.

Holistic thinking. Your mindset and details of life and follow-up are important. It is beyond the cash we are talking about. The health of the mind is very important for better responses and joy.

I have planned to be a writer, work a few hours at the lap-top, give my acquired knowledge to the younger generation for free and for cash depending on the circumstances. It would be value creation and satisfaction. Hobbies, passion can become fun and income yielding.

The values of the pension Acts and careful implementation must be applauded and protected. Frivolous agitations simply spell poor understanding of the real matters. More issues are consequences of the environment than pension failure of the current contributory pension scheme. It could not have been better, anytime. There is presently no fund as successful as it. Agitators might just be envying the strength and character wielded by the players in securing it.

For the government, the pension has more easily provided it with long term cheaper funds for development.

The private sector has been very successful in drawing into the fund at retirement, barring few authentications, matters often important, but ignored legal gaps caused by either laziness or ignorance. The present challenge lies with public servants and related bureaucracy in running affairs of the government. These are already disappearing. The government is clearing its backlog. The PPP, public, private partnership is working, as it is keeping all alert and in check. The infrastructure growth already enjoyed by all not imaginable.