Save for the rainy days
Catch a falling star and put it in your pocket never let it fade away
Catch a falling star and put it in your pocket
Save it for a rainy day.
These are the words of a song that used to be very popular when I was your age. The song gives some advice in this case to a young man to save something for a rainy day.
Let us try to understand what it means to save for a rainy day. What does that mean and what does the guy want to save? (ask children to help explain save for a rainy day)
Yes, as we now have agreed, when one saves for a rainy day it simply means that you keep some money for a time in the future that you might need it. And this is what we are going to talk about today.
You may think you are a child and that only adults can save for rainy days. Why is it so important to save? Not only for you but also for the country. Where do our government get the money to build schools, to pay your teachers’ salaries and to buy your school books? From taxes the VAT you pay when you buy groceries and other items but government receives most of our taxes from salaries, i.e. from your teachers’ salaries, my salary and all the other working people and companies that sell and produce products and services.
What if government does not receive enough money to build new schools, hospitals, pay salaries, etc? Then South Africa must go and borrow money. But when you borrow money, you have to pay interest. This means that you have to pay back more money than what you have borrowed.
It is the same as when your aunt wants to buy a bed on a loan instalment agreement with a furniture store. Let us say the price of the bed was R3000 and your aunt signs a contract to pay back the money over two years. She agrees to pay back the money by paying R404 per month. Now let us do some quick calculations: if you pay R404 for 24 months (two years) then your total will be R9 696. How much did the bed cost? R3 000. How much extra will your aunt pay for the bed if she signs the loan agreement? R6 696! She can buy three beds with that money!
The more money you borrow, the more you pay back. That is why it is always better to buy cash. But very few people have R3 000 in their pockets and that is why we must start saving for the rainy days. That is why we must put money aside for the times we will need big sums of money. It can be for one’s education; to buy a bed or a fridge or a cow; or a deposit on a house a house or a motor car or you want to start your own small business.
We also need to save money for unexpected events. Sometimes someone in your family dies and you need transport to go to the funeral or you want to contribute towards the costs of the funeral. We call these types of savings short-term savings.
But we also have to save for old age even when we are still very young. When you are a grandmother or a grandfather the old age pension that you will receive from government may not be enough for your needs and your children may not be in a position to help you. This may sound very far away today but you must also start saving for your pensioner days when you start earning a salary. We call this kind of savings, long-term savings.
South Africa has a low savings rate it means very few people are saving for rainy days. When we compare ourselves to our neighbouring countries we score lower than many of them.
The secret of saving is to start the habit of saving when you are very young. Then you are taking ownership of your own future. You don’t need to have lots of money to save. There is a saying, when you look after the cents the rands will look after themselves meaning if someone takes care not to waste small amounts of money, they will accumulate capital/the cents will become rands.
What do you need to if you want to save?
* Discipline and sacrifice, it is not always easy to say no to buy that sweet when you have money in your pocket
* Planning for the future, saving is all about the future, thinking what can happen, I may need to visit my sick aunt or I want to save for a course at the FET College or I want to buy seeds for my vegetable garden or I want to go to the library in town.
How can I save?
There are many ways in which you can save money and help your parents or guardians to save money:
One can save all by you or in a savings club or stokvel
I know of a group of women who started a stokvel two years ago with the idea to open their own business one day. For two years each of them put R25 per month in the savings pot. This gave them enough money to buy a small marquee tent and plastic chairs, which they now hire out for funerals. There is no reason why children cannot start their own stokvels. By saving as a group you can help each other to learn financial skills. You can also ask people, who are good at money and understand finances to give you some training. But for stokvels to be successful there are a set of rules to follow:
* group members must know and trust each other
* it is best to keep the group small (8 to 15 people), which allows for more open face to face discussions
* group members must have a common goal
* a treasurer must be appointed to bank the money
* a different person must keep records of all the payments
* bank deposit slips must be shown to everyone
* don’t divide the money in December, you will all spend it on nice to haves and when January comes when there are uniforms to be bought and other important items nobody will have money.
Save, save, save money whenever you get some. If you save ten cents of every R1 that has been given to you, you will soon have rands and no longer cents. Remember that saying that when you look after the cents the rands will look after themselves.
Don’t buy something you do not need. There are needs and wants. A need is something you cannot live without. A want is a nice to have.
Start discussions with your family about different ways you can save as a family.
Make sandwiches the night before to take to school the following day, rather than buying something at school. You can put anything on the bread even a spoonful of spinach or potatoes that was left of dinner if you don’t have peanut butter or jam left. It is not only cheaper but also healthier.
Help your family to start your own vegetable garden and to keep chickens. Then you don’t even have to buy spinach or eggs.
You can also save by giving not just out of generosity but also by agreement to receive the favour back when needed e.g. you can offer to help your neighbour to plant or harvest his vegetables but by doing this you expect him or her to help you when you need to plant or harvest.
Wearing clothes from a less expensive store does not make you less of a person than a classmate or friend who wears expensive clothes. You must also know how much your parents can afford. Help them to live within their means by not putting pressure on them to buy more expensive items that they cannot afford.
Open a savings account at the bank. Banks are more than money in a vault. They offer valuable financial education. Make use of it.
There is some money available for students if you want to study further. Apply for scholarships and bursaries and look for student discounts. Don’t forget to contact the government departments and FET Colleges for the vocational courses.
Entertain on a budget. Limit your hanging out fund. There are lots of fun free activities to keep you busy for example listening to music together, playing sport, etc.
Get value for your money. Shop around before your buy. When you have to buy something, make sure that you don’t pay more for something than its real value.
It is always better to pay cash for an item than to sign a loan instalment agreement. Remember the bed your aunt wants to buy? In the end she will pay thrice the price for the bed because she has to pay interest. If she saves R200 per month for 15 months she can pay cash for the bed without spending money on interest.
Be particular when it comes to money. Don't just trust anyone with your money. Be sceptical of classmates, friends or salespeople that have ideas for your money. Make sure that the money will work for you.
Ask. This is a learning experience, so if you need help, ask. Good honest business people and people who understand finances, such as the bank, are a good place to start and remember the sooner the better. Become money smart.
Remember, our beloved Madiba said that education is the most powerful weapon which you can use to change the world. You can improve your own situation by working hard at school and achieve skills and knowledge which can make you a life long learner. Catch those falling stars keep your dreams in your pocket and believe that you can achieve them. Save for the rainy days.
Issued by: Department of Finance, KwaZulu-Natal Provincial Government
28 July 2009
