Obinna Chima writes that developing the habit of setting aside a fraction of oneâ€™s income is a sure path to wealth creation and financial independence
One of the best ways to take charge of your finances in todayâ€™s uncertain economy is to develop a healthy savings culture.
Although seemingly not a priority early in life, experts believe everyone (especially young people) should make it a priority to save and invest early.
In fact, Dr. Barbara Oâ€™Neill, in â€œThe Benefits of Saving Money,â€ cited a report that revealed that savings is linked to increased happiness.
Actually, what the study found, according to Oâ€™Neill, was that people who are â€œplannersâ€ and do future-oriented things such as setting goals and taking steps (e.g., saving money) to achieve those goals feel happier, and better about their lives, than those who donâ€™t make plans.
On a related note, the Consumer Federation of America found a strong relationship between having spending and saving plans and maintaining emergency funds. Particularly for low-income individuals, those with a spending plan with goals were far more likely to have saved money for emergencies than were those without a plan.
Economists and psychologists attribute findings like these to the sense of control that people have when they plan ahead and know what they need to do to get from where they are now to where they want to be, Oâ€™Neill stressed further.
It is well established by research that people who feel a sense of control over life events are often happier, cope better, and are more resilient in times of stress than others.
Conversely, people are especially unhappy in situations where they perceive themselves to have a lack of control. That is why encouraging people to develop and implement a personal saving plan is very essential for wealth creation.
In Nigeria, the federal government and the Central Bank of Nigeria (CBN) have continued to stress the importance of financial literacy.
CBN Governor, Mr. Godwin Emefiele recently pointed out that financial literacy remained of great importance to the Bank.
â€œWe are concerned about the level of financial inclusion because individuals and households lacking adequate access to affordable and convenient formal financial services would be severely constrained in participating fully in the economy.
â€œThis will imply that the financial sector would be constrained in terms of expansion, as the disposable income in the hands of excluded persons could constitute greater savings and wider deposit base for banks.
â€œTo address our financial inclusion challenges, we have continued to implement various initiatives to ensure that as much of the eligible target population has the opportunity to access a variety of financial services,â€ he explained.
Emefiele said for consumers to fully utilise these services, it was important that they increase their financial literacy skills, complemented by consumer protection measures of the CBN.
In line with this, the federal government recently approved the Financial Literacy Curriculum at basic and senior secondary schools level, which would commence at the beginning of the 2017/2018 academic year.
Promoting Savings Culture in Nigeria
It is no longer news that millions of Nigerians are still excluded from Nigeriaâ€™s formal financial system. Also, the size of the countryâ€™s informal sector is frighteningly and has not been adequately captured.
The reasons are not far-fetched and varied. With Lagos as an example, the bus driver, motor-cycle or tricycle rider who has no form of interaction with any bank, just like the petty trader, truck pusher, or even the petrol attendance, whose only known form of banking has remained the thrift or Esusu collector who shows up in his or her shop daily or weekly.
These classes of people are also comfortable with â€˜Ajoâ€™, the famous or contributory scheme, whereby a number of people contribute a specified amount daily, weekly or monthly and take turns to collect the bulk sum at regular and agreed intervals. Such people have also over the years become comfortable with these arrangements, despite the well documented incidences of fraud and bad faith exhibited by some of the stakeholders in these schemes.
Most of these schemes and many others, account for the huge sum of money outside of the formal banking system, which the Central Bank of Nigeria (CBN) put at N1.975trillion at the end of April 2017.
According to the Enhancing Financial Innovation and Access (EFInA) as of December 2014, Nigeria had 65 per cent of its population as financial included, leaving out 39.5 per cent or 36.9 million people.
A breakdown of the financially included showed that 33.9 million, representing 36.3 per cent of the population were captured in its banking sector; while 12.3 per cent or 11.5 million are captured as â€œformal other;â€ and 11.9 per cent or 11.2 million, under â€œinformal only.â€
Therefore, in order to promote financial inclusion, EFInA suggested implementation of digital banking and improving network in rural areas by stakeholders such as the CBN, banks, the Federal Ministry of Communication, National Communications Commission (NCC) and Ministries Department and Agencies, among others.
The document also noted the issue of the high incidence of credit and low uptake of micro-loans, low awareness of movable collateral registry, while enjoining CBN and the banks to leverage on existing credit schemes, while raising awareness of collateral registry.
Stakeholders in Nigeriaâ€™s financial sector have always recognised the need to promote financial inclusion in the country, which lead to the launch of the National Financial Inclusion Strategy (NFIS) with a target of reducing the number of adults excluded from financial services from 46.3 per cent in 2010 to 20 per cent in 2020.
According to the December 2016 Financial Stability Report (FSR) released by the CBN recently, showed that there are 60.878 million active bank accounts. Also, the report drew attention to the 2016 Access to Financial Services (A2F) Survey conducted to provide data on the status of the 80 per cent inclusion target by 2020 as enunciated in the NFIS.
Many banks in the country have since keyed into this financial inclusion mantra through several initiatives, including promotions to encourage savings culture among Nigerians that has remained a very a favourite for banks seeking to grow deposit base.
One of the banks recently took it a notch further when it partnered the Nigerian Stock Exchange (NSE) to commemorate the 2017 Global Money Week to promote financial inclusion and literacy.
Access Bank Initiatives to Boost Savings
The NSE, in collaboration with Access Bank had offered series of programmes to raise awareness and improve capabilities of among youths to make sound financial decisions.
The NSE said that the event was to mentor young people on investment matters. Employees of the NSE mentored young people on how money works, saving, investing, creating livelihood, gaining employment and entrepreneurship.
The partnership between the two organisations focused on building a financially savvy generation of future leaders whilst developing an inclusive financial system.
In addition, the bank recently unveiled a new savings scheme tagged â€˜Family Savings Scheme,â€™ initiated to give its customers a boost in their savings. The exercise, according to the bank, was in line with its commitment to promoting savings culture among the populace.
The â€˜Family Savings Schemeâ€™ is a savings scheme designed to encourage families to save together and enjoy exclusive privileges such as high interest rates and family rewards while they continue to enjoy the confidentiality of their banking relation and manage their accounts as unique individuals.
The scheme provides access to people who are presently excluded from financial services whilst promoting capital accumulation and investment boom.
Under the scheme, a minimum of four family members are encouraged to bank with Access Bank and enjoy exclusive value propositions. Eligible family members include partners, children, parents, aunts, uncles, cousins and grandparents.
According to the Bankâ€™s Executive Director, Personal Banking, Victor Etuokwu, the scheme comes under new segment in the Bank – Family Banking Segment. â€œThis is not a new product but a new segment in the bank. We have basically pulled together the various products we offer to unique family members under this Segment,â€ he added.
He listed some of the value propositions of the savings scheme to include education advisory services, deals and discounts, higher Interest rates, insurance, school fees advance and home loans.
Etuokwu implored the existing and prospective customers to take advantage of the â€˜Family Savings Schemeâ€™ to save and more importantly for economic development.