We have heard this advice many times before from our parents and well-meaning friends: “It’s not how much you make but how much you save that counts” or the more clichéd “Save for the rainy day.” Yet for many people, especially for the younger generation receiving their hefty pay checks or generous allowances from their parents, this advice usually falls on deaf ears. This column is dedicated to our Millennials in an attempt to encourage a savings culture among the young. Our Millennials are smart, talented, driven, ambitious, empowered, independent and so full of life. But they are also faced with the many facets and challenges of adulating. The various challenges are before them, from love relationships to working with others in an office or business setting to managing their own funds now that they’re independent and living by themselves. One of those to address is how to inculcate in them the culture of saving and how to maximize it.
The world is full of seemingly irresistible things people are attracted to. There’s always luxury items to buy, such as top-of-the-line cell phones that get outmoded every so often; branded handbags that cost a fortune; the latest model SUVs, never mind if there’s no more space in the garage. Suddenly, all these become the “necessities” and no longer the luxuries of before. The movie “Shopaholic” captures a hapless working woman who just had to have the latest and most fashionable name-brand dress, scarf, shoes and other fashion items, most of which were way beyond her means. I am sure no one would like to end up like her who had to sell almost everything she bought in slashed-down prices to pay off her credit card. No one would like a life constantly hiding and running away from collectors.
Impulse shopping and uncontrolled spending have driven some people to the verge of bankruptcy, pushing their debts so high it’s beyond their means to pay them off. Others use one credit card to pay off another. Still others scrimp and scrape on some basic items so they could splurge on the new “necessities”.
And then there’s also the mindset of value-formoney we need to instill. We tend to buy cheaper items in smaller quantities, thinking we could save. But there’s economy in volume. We can also save more when we buy few expensive items but of higher quality which will last longer. Sometimes we splurge on goods which are on sale but we need to really ask ourselves if we really need them. This pertains to food and non-food items.
The Philippines Gross Savings Rate is 14.2% in March 2018, compared with 16.0% in the previous quarter, according to CEIC, an organization founded in 1992 by a team of expert economists and analysts that provide data insights for more than 195 economies. This figure is consistent with the results of Dr. Fernando Aldaba, PhD, professor of Economics at the Ateneo de Manila University and senior fellow of Eagle Watch, the school’s macroeconomic and forecasting unit. Dr. Aldaba compared the Philippines Gross Savings Rate with Southeast Asian countries, noting that in 2005, the Philippines’ Gross Domestic Savings as a percentage of Gross Domestic Product was 15.9% compared to Indonesia’s 27.5%; Thailand’s 29.5%; Malaysia’s 44.3% and Singapore’s 49.4%. Evidently, our savings rate even deteriorated from 2005 to 2018.
Not only are we a country with a lower propensity to save, we also import a lot because we are dependent on imports even for basic things. When we look at our consumerist attitudes, we wonder what makes people spend rather than save? Is it the powerful and irresistible advertising pitch and marketing strategies of some popular products? Is it the Filipino “pakitang-tao” attitude still in play to show others that we can afford or do we try to outdo one another in having the most expensive material possessions? Or is it the instant gratification impulse that makes us want something so bad we’d like to have it right now, rather than wait till tomorrow or till we’re ready?
The virtue of saving is akin to delayed gratification. We save now so we can build a comfortable future later. Having sufficient savings would make us ready for business opportunities and other investments later which would make our money work for us. It will also give us some security so that even if we lose our jobs or lose in our business enterprise, we will have sufficient reserves to carry us through as we recover, re-build or re-direct our career paths. Further, we can save for big-ticket items like real estate that would appreciate over time or invest in securities, stocks and bonds that would yield far greater returns for us. Finally, attending financial literacy seminars would open up investment products available.
It’s not late – from a nation of spenders, we can transform into a nation of savers and investors. It might be a tall order at this point in time but something worth aiming for. People may ask, is there any remaining cash we can set aside as savings from our pay checks with the increasing prices of commodities? It all starts in the battlefield of the mind.