Building a culture of savings, investment is crucial

For the past six-years the Dar es Salaam Stock Exchange have been running an edutainment challenge dubbed DSE Scholar Investment Challenge whose objective is financial literacy i.e. educating and sensitizing the youth, especially those in universities, colleges and secondary school, about the necessity of savings for investment, in this case investing in listed securities and bonds.

This is in trying to avoid situations where the next generation will have to live in the situation of not having enough assets (i.e. share, bonds, property, cash, etc) to meet obligations which then create significant stress, leading to host of problems, such as depression and heart diseases.

As it is said in the book of Proverbs 21:20 - [There is] treasure to be desired and oil in the dwelling of the wise; but a foolish man spendeth it up. Also Proverbs 13:11 - Wealth [gotten] by vanity shall be diminished: but he that gathereth by labour shall increase.

Thus, educating oneself and pursuing the discipline of savings and investing for the future is where wisdom towards financial freedom begins. This applies to individuals, but a nation also 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.

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 saving, government saving (surplus), and foreign saving – 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, there are 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, 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.

In many cases, people and companies tend to save and invest if they trust the institutions that manage their money and the economy at large.

Countries with a high savings rate withstand financial shocks and channel more funds towards critical sectors of their economies.

However, building this resilience is steeped in a culture of saving and investment. We are told that less 20 per cent of Tanzanians have a bank account, and as it stands only about 1 per cent have an investment account at the stock exchange.

As I argue for an idea and a culture of saving for investment I also underscore the fact that ours is a developing nation pursuing a vision of becoming a middle income country within this next decade, that as it stands those among us with formal employment are few and with poorly paying jobs to meet the cost of living –individuals have minimal disposable income and less to save and invest.

I understand all of that, but within such circumstances there is opportunity to save for investment, you see this is also largely of a cultural issue.

We all know some of us whose circumstances are better and could save and invest than they already do, however without discipline and a propensity to spend than to save – it becomes difficult. This is a question of choice.

As I said in previous articles, one need to assess his/her financial health to help in the understanding the direction is headed towards achieving financial freedom.

In doing this one need to have a clear picture of income and expenses, then plan and be focused on setting aside a portion of your income for investing, don’t spend unwisely.

As for our collective greater good – what is being currently pursued by the government in strengthening property rights by way of land titling will go a long way in promoting greater saving and investment in the area of real estate, and beyond.

Along with this, ongoing efforts by the government to improve the business environment and addressing infrastructure challenges especially in the areas of energy, transport and communication is another key aspect of what the state can do to incentive people within the society to save and invest in new projects.

Embedded into the above is also the commendable act by the government to shift public expenditure and spend more on infrastructure projects than on wages, goods and services.

I know this can sometimes seem complicated and may require a good way of striking the balance, especially based on what I said earlier -- better wages and well-paying jobs enable individuals’ savings for investment – but for our collective greater good, sometimes the principles of social contract enshrined onto Leviathan (or commonwealth) as argued by Thomas Hobbes (the philosopher) may have to come into play. After all, if the state can save and invest on our collective behalf, benefits could apply the same, as long as mechanisms and tools for distribution of the wealth created is equitable and efficient.

But it all starts with the knowledge, commitment and focus.