Important to inculcate thrift habit

Jamaica has a low savings to gross domestic product (GDP) ratio.

The World Bank indicates that the Jamaican Gross National Savings, as a percentage of its gross domestic product (GDP) for 2016 was 7.8 per cent. For The Bahamas, the figure stood at 19.2 per cent; for St Kitts and Nevis, it was 26.5 per cent; and for China, 46.5 per cent.

The World Bank further estimated that the Jamaican GDP growth rate in 2016 was 1.4 per cent, while for The Bahamas, it was 0.2 per cent; St Kitts and Nevis, 2.2 per cent; and China, 6.7 per cent.

Rose Miller, grants manager at JN Foundation, noted that social pressures generally push persons to spend when they should be saving. However, she said that it is important for Jamaicans to inculcate the habit of thrift as this is important not just for building individual wealth, but wealth for the country as a whole.

“No matter how much you make, at the end of the day, it is what you save that really matters. Besides, if one has no savings, there will be nothing to invest, thus opportunities for creating wealth through investments would not be possible,” she stated.

Miller said that, unfortunately, many people discover far too late that they have not put aside enough funds to provide a cushion in the event of an emergency or for their retirement.

NO EMERGENCY FUNDS READY

A survey, which was conducted as part of the 2014 Global Findex, found that there was some level of financial insecurity among Jamaicans, with many persons being unable to come up with money for an emergency.

The study indicated that when asked about the feasibility of quickly coming up with $28,000 for an emergency, 37 per cent of Jamaicans reported that it would be “not at all possible” or “not very possible”.

Those who responded “somewhat possible” represented 22 per cent, while those who said it was “very possible” represented 37 per cent of those surveyed. The most commonly reported source of funds were from friends and family, followed by savings.

Miller explained that this was one of the reasons many Jamaicans were forced to work beyond the normal retirement age or struggle during their “golden years”, or, in a worst case scenario become dependent on the benevolence others, especially their children, for their survival.

“The reality is that most Jamaicans do not establish adequate pension arrangements to ensure that they have a steady source of income when they retire,” she said.

In fact, the Financial Services Commission (FSC) found that private pension plans, up to September 2017, only covered some 9.19 per cent of the persons employed in the Jamaican labour force.