Building a Nation through thrift, savings and investments
by Staff of Bank of Montserrat Ltd.
My examination of the way in which we live today, makes me often wonder how our parents were able to make-it; how they were able to raise a family (and in some cases very large families) on, what we can today call, very meager salaries. The combined income of my parents in the 60s/70s was no more than EC$700.00 per month; yet they were able to provide for the family, send us to school, build a home without borrowing and save some money for a rainy day. How did they do that?
I asked my father this question and with a very pensive expression he replied “By being penny-wise”.
The word penny-wise or thrifty carries the connotation of being frugal, economical, careful, cautious, prudent, sparing, and parsimonious. It means not wasting money on things you do not need. It means making whatever you buy last you for a long time. I remember my father teaching me how to polish my shoes every weekend – now I know it was not only to make them shine, but more so to make them last for many year.
Our parents were so prudent in their spending and savings habits that they formed associations with their neighbors to promote savings. They formed co-operatives, building societies, burial societies, etc. to save money for future use. These societies helped our parents become free holding middle-class homeowners and small-scale entrepreneurs – remember the small community grocers? They were everywhere; in every community, filling a need. We also had the cobblers/shoemakers, tailors, seamstresses, bakers, joiners, farmer, fishers, etc.
Today, some of our young people spend all the money they earn (and some even spend more than they earn ) on wasting assets – cars, cell phones, computers – A young man would ‘blow-off’ his entire month’s salary to purchase a Blackberry for $1,999.00. By the time these young people reach 40 years of age, they have no savings and no real assets and they feel that the world owes them everything.
Our parents helped build our nations by not being wasteful, and by saving whatever little extra money they had – $20.00 a week, $100.00 per month, it all added up. Banks were able to aggregate all those small savings to make loans for productive purposes that helped in building our communities and our country. Today, we are bombarded by big business and credit card merchants to consume, consume, consume. Consumerism is jeopardizing our economic growth and threatening our financial system. How? When we buy consumer items (Cars, cell-phones, Plasma TVs, etc) as often as we do, we are sending our hard-earned money to foreign countries, depleting our local savings base. If there are no savings in the Banks, then Banks cannot make loans for productive purposes. We must work with our young people to reverse this negative trend.
BUDGETING AND SAVINGS
First and foremost everyone must budget and save. These are basic skills required to contribute to your economic development. Make a budget to reflect your financial goals in life. It is easy to overspend when you do not keep tabs on your spending. What do you want to achieve in the future? Save 10% – 15% of your income towards your goals. Never spend more than you earn – this is sure to put you in the poor house, no matter how hard you work or how much money you earn.
NEEDS AND WANTS
Distinguish between your needs and wants. A need is something you must have to survive like food, shelter, and clothing. A want is something you would like to have, but is not necessary for your survival, like a Blackberry, flat screen plasma TV.
INVEST IN APPRECIATING ASSETS AND AVOID WASTING ASSETS
An appreciating asset is something that increases (appreciates) in value over time, like A Fixed Deposit in the Bank, Land, Land and Building. A wasting asset is something that loses value over time, like a Car, Cell Phone, Plasma TV, etc. As far as possible buy things that increase in value.
When you invest in appreciating assets, you are not only helping yourself, but you are also helping your country. The money you invest in the Bank is used to give loans to others for productive purposes. This helps the overall economic development of our country. The money you invest building a house in Montserrat, stays in Montserrat and the economy benefits – Building materials vendors, Building Contractors, masons, carpenters, plumbers, electricians, cabinet makes, tile layers, painters, etc. all benefit from your investment. When these tradesmen/women spend this money in the local economy it benefits the country. On the other hand, when you invest in wasting assets like Cars and flat screen Plasma TVs, that money goes outside of Montserrat to pay the manufacturers of these items – there is no sustained benefit to the local economy.
INVEST IN EDUCATION
When more Montserratians are educated, both in the academic and technical areas, there will be more Montserratians working in leadership roles in the country, helping to shape and direct the future of the nation. Education is not only an appreciating asset, but it is also a long lasting asset. When the economy is doing badly and businesses fail, our educated men and women will be there to lead us back to prosperity.
THE BOTTOM LINE
The following are fundamental issues in building a nation:
(1) Budget and Save money for future use.
(2) Encourage entrepreneurship and cottage industries
(3) Stop the wastage and consumerism
(4) Invest in your education.
Contributed by Bank of Montserrat Staff
