Demystifying secrets of money management
As people all over the world are talking about savings and making investments, Malawians, deep into the 21st Century continue to make baby steps towards attaining financial literacy and good money management practices.
A 2008 Finscope survey made stuttling revelations among them that close to 45 percent of Malawians lack financial awareness with only 19 percent of the population having access to banking services. It also showed that only a mere three percent of the population has access to insurance services.
In an attempt to coax more and more people to become banked and develop a culture of saving, financial institutions are constantly in the news to announce promotions and competitions with appealing grand prizes as the country tries to meet the target to have 40 percent of the population banked as agreed in the national financial inclusion strategy.
According to the Reserve Bank of Malawi, informal data from a baseline survey that the central bank has conducted shows that even though the country may not achieve the target as agreed, steady progress has been made with now close to 30 percent of the population being banked.
It is against this backdrop that one of the country’s financial services provider Old Mutual introduced it’s On The Money programme to enhance financial education and encourage a culture of saving among Malawians while at the same time demystify underlying myths about money that influences people’s ability to use, grow and protect money.
On The Money unpacks the big five secrets of money management based on a study the company did involving the big five animals found across Africa namely the elephant, buffalo, leopard, rhino and lion.
It says the unique characteristics of the lion, elephant, buffalo, leopard and rhino, as found in nature, have been distilled to teach Malawians secrets about how to manage their personal and family finances.
On the Money shows the direct link between individual saving habits and national prosperity and growth.
But, is there any link between how much a person earns and how well they can manage their money?
In an interview, Old Mutual Financial Adviser Benson Chirwa said that there is no connection between what one earns and their money management abilities.
“That is good news for everyone. It means that despite our earning levels, we can all learn good money management habits and we can all aspire to a good level of financial security,” he said.
“I can’t save!” Many people often cry out. Their argument is that there is nothing left to save at the end of the month. But according to Old Mutual Sales Manager, Grey Tewete not being able to save is one of the major reason why most people live miserable lives in their old age.
He said in Malawi, unlike in other better performing economies, government does not take give out subsistence allowances to people who are unemployed and as such making it a requirement for people to set aside savings that they would tap from once their employment becomes unattainable.
What can we learn from the lion?
Most people understand that they need to save and some do save a little bit at the end of the month whenever they can but, according to Chirwa, this often doesn’t work as there always seem to be other expenses that eat into this amount.
“The first secret of the big five, the secret of the lion turns this behavior around and says save first ahead of all other expenses, and not last, out of my leftovers. Like the lion, which eats first ahead of the pride (group), you should pay yourself first and save a fixed amount each month,” he said.
He added that saving should be an automatic deduction taken from a person’s pay, before they start paying other expenses.
“By looking after your saving needs first, you are securing the future of your pride-family,” he said.
In securing the future of their family a person can be shielding them from the effects of a sudden job loss, death or unexpected medical bills, among others.
Chirwa said savings should not only be a priority but also automatic if Malawians are to change their saving habits.
“You need to decide on a way that automatically deducts the money from your account at the beginning of the month and transfers it into a savings account or other investment,” he said.
Creating a financial plan
Starting a savings plan is a goal that has made its way on many people’s New Year’s resolutions lists but only to tumble and fail a few months into the New Year. Many people’s savings plans, according to Chirwa, fail because the goals are too vague.
“The secret of the leopard is very simple: learn from the leopard and have a very clear idea of what you are saving for. Saving isn’t easy. You need a vision-something really inspiring to keep you on track when times are hard,” he advised.
The secret of the elephant: Knowledge is power
According to Chirwa, under the secret of the lion, Old Mutual teaches that a person should have a clear understanding of their monthly expenses vis a vis what they earn.
“Proper record keeping will help you understand your spending habits better. It might surprise you to see how much you actually spend on items such as transport, lunches, cell phones et cetera. Once you have recorded what you actually earn and spend your money on, you can plan how to change your spending habits to suit your income and future goals,” he advised.
He added that budgeting is a skill everyone can learn.
Charging down on debt
On the Money also teaches the skill of tackling debt which is the most serious threat to any long term wealth creation plan.
“The secret of the rhino teaches you to face your debt head-on. It tells you to charge down your biggest threat to financial stability-debt. Learn from the rhino-charge down your debt as fast as you can!” he said adding that people can also learn from the buffalo to protect their assets and make their money work for them.
Old Mutual is currently offering On The Money trainings to individuals and groupings interested to enhance their money management skills free of charge.
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