Learning how to manage money is an important life skill and getting the right balance between spending, saving and investing is fundamental for a better life and wellbeing.
It was somehow clear during the partial lockdown, where it was observed that a significant portion of the population could not manage to sustain themselves without daily income, and only a few were able to sustain themselves without it. This brings to the fore the whole aspects of the necessity of financial literacy especially the harnessing of the culture of saving in a society.
By the way savings is said to be one of the wise practices. For instance, the bible teaches that saving money is a wise practice for many different reasons. Proverbs 6:6-8 says: Go to the ant, you sluggard; consider her ways, and be wise, it has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest; and Proverbs 13:22 says: A good man leaves an inheritance to his children’s children. Without the discipline of saving, you cannot be able to have food or cater for health challenges during difficulties, nor would you able to leave inheritance to your children, let alone your children’s children.
Now, given that most of the households in Tanzania depends on their daily wages, striking the balance between savings and spending remains quite a challenge. In most cases families are left with minimal or no savings. Yes, according to the recent world bank report, Tanzania like most African countries’ savings rate is still relatively low, at around 30 percent of the gross domestic product. One may argue that this rate is better than many other countries, however for that argument to hold one needs to also consider the low level of our per capita income, the quantum is still relatively lower.
One way to promote a savings culture is through financial literacy. Financial literacy enables us to possess the set of skills and knowledge that allows us to make informed and effective decisions related to the management of our financial resources. Understanding basic financial concepts allows us as the people to know how to navigate in the financial system and financial markets. It is obvious that people with appropriate financial literacy training make better financial decisions and manage money better than those without such knowledge.
So, it calls for all stakeholders – from private and public sector – to continue to stress the importance of financial literacy and developing the savings culture among us. Specifically, for us who are in the financial markets, whether in the banking sub-sector or the capital markets, or pensions, or insurance to inculcate financial literacy among Tanzanians. This is not only important but also a matter of necessity because individuals and households lacking adequate access to affordable and convenient formal financial services may be severely constrained in participating fully in an inclusive economy, if they lack basic financial knowledge.
Furthermore, financial education can help individuals to understand the basic principles of money management, including how to plan and budget as well as how to manage their finances. They can learn how to build a personal saving plan, or create a personal portfolio investment plan – all to support short-, medium- and long-term savings and investment goals; whether for building a house, or funding children’s education, or to generate sustainable income during the period of retirement.
One may rightly ask: why is it crucial for people to save, while they have periodical sustainable sources of income, i.e. those employed and earns monthly salaries? The answer is simple, the matter of savings is never defined by whether you earn or the amount of you earn at this moment. It is actually a matter of principle, let go back to the wisdom from the spiritual and faith. The book of Proverbs 21:20 says – In the house of the wise are stores of choice of food and oil, but a foolish man devours all he has. Also Proverbs 13:11 tells us – Wealth [gotten] by vanity shall be diminished: but he who gathers money little by little makes it grow. So, educating oneself and pursuing the discipline of savings and investing for the future is where wisdom [towards financial freedom] begin.
But the matter of savings as it applies to individuals, it applies to nations as well. Any nation needs to create the saving culture and the saving-investment identity. This is necessary for the national income, because the amount saved in an economy will be the amount that can be directly invested or intermediated for investment in new physical machinery, new infrastructure, new inventories and the like; for, it is true than in an open economy private saving plus governmental saving plus foreign investment domestically equates into physical investment. In other words, the flow of investment must be financed by some combination of private domestic savings, government savings, and foreign savings – it is good to enhance domestic private and government savings.
Going back to personal finance – from overspending and financial setbacks to incurring massive debt and simply just not making enough money, it seems to me that there are always several huddles that one has to overcome. Therefore, cultivating the habit of savings is very important and can be helpful in many aspects of life. A good saver can set aside funds for business, a good saver is debt free and has already made a right as well as bold step towards financial freedom. A good saver can also reach certain goals that cannot be attained on the limited income that one gets.