Savings Mean Pay Yourself First.

Savings simply means a deliberate accumulation of excess funds by spending less than what you earns. It is deliberate attempt to financially succeed. You save by giving up the purchase of something in the present.
As a trade-off you should ensure that your savings are realistic and the opportunity cost of what is given up to save is not too high.

Pay Yourself First

It simply means before you pay your bills, before you buy groceries, before you do anything else with your salary, set aside a portion of your income to savings account. After working so hard, the first bill you pay each month should be to yourself. This habit, if practice early and continuously, will positively impact your future.

How to Pay Yourself First

The best way to develop savings habit is to make the process as the first thing after the pay. This is how to do it.

• Save a predetermined amount of money on each payday.
• Do so before using money for spending.
• Do so each time you are paid.
• Make it automatic and invisible through standing orders instruction to your bank.

Why You Should Consider Saving some Money

By saving some money today, you will enjoy the financial benefit in the future.

• Emergency funds – Cash set aside to cover the cost of unexpected events. This includes unexpected repairs, if you have no health insurance your medical bills can also be covered.
• If you saved enough, you can turn part of the saved funds to investment. Investment includes buying land or properties, payment of higher education or start a small business.
• Financial insecurity increases stress – When you have no proper savings, you tend to be worried about every small increases in the price of goods or services.

How Much Money Should Be Saved?

The amount depends on your financial goal and the time needed to fulfil that goal. However, the following list generally affects your  ability to save.

• Income – the more you earn, the more you can save.
• Dependents – How people depends on you ?
• Job security – Temporal workers are expected to be disciplined about savings compared to permanent jobs. Please note that in reality all jobs are temporal.
• Insurance coverage – Do you have any medical insurance? If no, then you need to setup an emergency savings.

Whatever your goals are, you should generally have a 6 months living cost in your savings account.

Identifying Money to Save

If you take a close look at your expenses, you may find that even small changes in spending habits, could create big savings over time. For example instead of paying taxi ( “town trip”) to work, you could commute with the general vans or yellow cab.

• Examine your current spending habit
• What changes can you make to reduce current spending?
• Separate the spending list into needs and wants
• Consider small, often daily, expenses
• Consider large, often monthly, expenses

If you’re struggling to find money to save, consider setting aside your next pay increase for the future.

Power of Periodic savings

If you save D250 per month starting age 25 and the money earns 5% per annum, how much will be the value of the savings at age 65 (retirement age)? The answer is: you will have over D380,000.

This shows the impact of three things

1. The length time you have been saving,
2. Interest or return paid on your account and
3. The amount of funds your save on periodic basis.

Common Savings Products in the Gambia

Savings products are secure and liquid accounts offered by financial institutions assisting in the management of your fund. The common savings products in the Gambia includes:

• Current Account – Cheque book issuing account usually with no interest. It is not a good savings tool because there is no return and the bank will charge for services including commission on turnover.
• Savings Account – This is the common savings tool with low interest rate and easy to access.
• Treasury bill and “Sukuk” – Money market product, high interest return but required minimum amount of D25,000 in the Gambia. It is issued by Central Bank, hence low risk. You can buy them through your bank.
• Fixed Deposit – Deposit given to banks for specific period, higher interest than current and savings and also requires minimum investment amount.

Savings are design to help you meet your short and long term goals. It requires discipline and focus. If you are not saving at the moment, you should quickly do a financial health check. The earlier you start saving, the better for your future.