As we head into the last month of 2021, two things are worth paying close attention to. The first thing to note is that with Christmas and the New Year around the corner comes the temptation to overspend without taking into cognizance the future. The other is that December is often considered “the second-longest month of the year” right behind January. Because salaries come earlier than usual, and companies are winding down operations before the bustle of the new year.
These two factors sometimes hurt our finances as we get tempted to spend more than usual. There are largely two types of people in January. Those who are constantly looking at their account balance by January 1st and wondering why they weren’t more careful in the weeks before and those who still have enough to cater to their needs and maybe have a little extra for their wants.
To be in the second group and enjoy this festive season without regrets, one must be deliberate about building discipline and fostering a culture of budgeting and saving. Yes, no one wants to hear about saving when all thoughts are focused on enjoying the season with friends, family and all the trappings this comes with. However, here’s a different way we can look at it, irrespective of the season, budgeting and saving are important habits anyone can have, regardless of how much they earn.
The popular expression, “little drops make an ocean”, is a perfect analogy for saving money. What it simply means in this context is that small amounts can eventually sum up to big things. Your little effort can yield a strong result. In Nigeria’s high inflation economy, where one pay check barely lasts until the next one, a healthy savings culture is one of the most rewarding financial habits to have, especially as we head into the festive season. However, saving money does not happen by accident; it requires effort, consistency, and a lot of discipline to budget for one’s needs and wants.
Season’s greetings or season’s debt?
Let’s zoom out for a little and look at saving from a wider perspective. Data shows Nigerians are one of the lowest savers globally. Compared to some other African countries, the gross domestic saving performance of Nigeria is remarkably underwhelming. According to a financial report by Stears Business, Nigeria has an “abysmally low savings rate, even compared to countries with similar living standards.” A similar report by the International Monetary Fund attests that the gross national savings in Nigeria stand at a rate far below the savings rates in other African countries like South Africa and Angola.
Why is this important? There is a solid correlation between savings and economic growth. Countries with high national savings rates are not dependent on foreign direct investment. These countries with higher savings rates experience faster economic growth than those with lower savings rates.
Read also: Stanbic IBTC promotes savings culture with Reward4Saving campaign
Facts and figures from the 2004 United Nations Conference on Trade and Development also highlighted the increase of savings as the major factor in increasing in-country capital. Hence, developing countries should make creating schemes that encourage domestic savings a priority. Understanding that one factor that largely influences the development of an economy is investments, and savings stimulate investments, it is safe to conclude that the advanced economies saw to it they had a savings culture, both individually and nationally.
Zooming in: Fostering a culture of saving this season
On this topic of improving savings culture, we can’t overemphasize the importance of having a dedicated account. This system will ensure that it is easy to remain focused on goals and never touch the money meant to be saved.
Sadly, many Nigerians are unbanked and lack access to formal financial services. The 2017 World Bank Global Findex database on Measuring Financial Inclusion estimated that 1.7 billion adults remain unbanked globally, and only 40% of Nigerians have bank accounts. Correspondingly, a 2016 survey by Enhancing Financial Innovation & Access (EFInA) revealed that only three out of ten Nigerian adults save their money in banks.
One impact of such high levels of financial exclusion is reduced, or even forfeited, opportunities for business growth. Ultimately, people would be short of opportunities to maximize their income and expand their businesses.
At Wema Bank, we have thought through this a lot, and that has led us to decide to increase the savings interest rate on our ALAT platform by up to 8.75%. We understand that having a savings goal gives Nigerians a good idea of how to direct their savings purposefully. So, we added a goal feature to the platform, which includes an array of savings options that help set and meet savings targets based on a prefixed schedule. It is as simple as choosing what to save for and earning up to 8.75% annual interest on the savings.
Saving little by little might not seem significant now. The savings might sometimes be hardly noticeable but having a saving culture will prove rewarding in the long run, especially as we head into a season of celebration. It’s never a good idea to celebrate so much that one loses sight of possible financial goals.
Budgeting your way into 2022
Fostering a good saving culture all boils down to proper budgeting and management of one’s finances. They are both intertwined and are of great importance as we all take a well-deserved break.
This means that it is necessary to earmark funds for the next two months. Plan expenditure for all activities and even funds for spontaneous spending – we all have those moments when we are surrounded by loved ones. Looking at the realities, be reasonable with your budgets.
When all funds have been accounted for, save the excess and focus on working within your budget.
To save yourself the trouble of thinning finances in January, the budgeting must begin in earnest.
Mabawonku is the chief financial officer of Wema Bank PLC
