Monday, May 20th

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Financial education we need

By Terry Nisbett

As we make comparisons and learn more about the rest of the world, it is clear that workers and consumers in the developed world are provided with much information on which to make important financial decisions. In the developing world and in our region, the access to information is not similarly available. There are attempts to remedy this, but the efforts are generally short-term and less sustained. Sometimes, the manner and method of imparting information are not appropriate or tailored to different audiences. It is true that we have lots of gadgets that we can use to obtain information, but at times we need information specific to our country and even in an interactive form where we can ask questions from a person on a hotline or post questions and get answers or even see our questions anticipated and answered in a "Frequently Asked Questions" column. Pensions and retirement planning are areas where more information would likely be appreciated.

Even a casual observation of the society and economy around us reveals that a fairly large percentage of persons is self-employed. Some such as small shopkeepers and taxi drivers are in registered businesses but even more like produce vendors are in informal, unregistered businesses of their own. With the increased focus and in fact national policy to encourage entrepreneurship, the percentage of the self-employed is likely to increase. As some of these persons move towards retirement age, it is becoming obvious that unlike the public sector and some private sector employees, many of the self-employed will not have a pension to assist them during retirement. It is only fairly recently that the Social Security Board has been encouraging the self-employed to make contributions towards a pension and other benefits. That organisation is in fact the most audible voice in trying to get the self-employed to think far into the future. A more public awareness drive is necessary, especially targeting the young who are starting their own small businesses or doing freelance work.

Young healthy persons (and older healthy individuals too) usually have no expectations that they may need a retirement fund because they are currently able to provide for themselves or for their families. Younger ones usually feel invincible and retirement is too far away to consider. However, consider the fact that most self-employed persons in our region tend to be in the services sector. That means that often they have to be physically present to provide the services. But physically, one may not be able after a certain age to stand for hours performing hairdressing or barbering services. Similarly, the day may come when one may be disinclined to climb the scaffolding to paint the side of a building. So all self-employed groups need to be targeted and at least be told about alternative retirement provisions appropriate to their earnings.

We have examples of older persons in communities who had to be brought to the attention of the Social Security Board in order to receive non-contributory pension. These persons were not necessarily idle in their youth. Some worked for themselves at not very lucrative occupations and once their health and age prevented further effort, their little savings disappeared. The time for that is over. The status of our countries, with the various financial institutions we have, could guide people to better planning and alternatives, but the information should be made available for their guidance.

Often, retirement and pensions were matters not discussed in lower income households. They are probably still not discussed, even though citizens are better educated and perhaps better off. But while we could excuse previous generations, it is a level of ignorance about important matters that we should not perpetuate. Most parents encourage their children who are earning to start a savings account. The next level is to encourage those who like to be their own boss to pay into a retirement fund, whether it is the Social Security Fund or another private fund. Many of our young people are disc jockeys, musicians, entertainers and athletes. They may get the big break that earns them millions one day or they could earn the millions steadily overtime. But at this time, some information on a retirement plan may help them all. It would even be good preparation, for when the big break comes, they would have been accustomed to financial planning and could carry it to another level.

Employees too are often unaware of the exact nature of the pension schemes of their workplace. This is true even for government workers. In most cases, many public sector workers have no knowledge of the method by which their pensions are calculated. Public sector workers prize the security of the promise of a pension upon reaching retirement age or after a specified number of years of service. Unfortunately, it is only at that point that many become aware that the size of the pension is inadequate for them to maintain the lifestyle to which they are accustomed. For those who remain as public servants, getting the right information about pensions would help them make a decision to perhaps boost their retirement income with a private pension fund offered by a financial institution. They could also weigh the benefits of remaining with the security of the public sector pension or taking their services to the private sector for more pay and provide for their own retirement. These are matters we need to discuss within our families and in our communities.

Much of this discussion resulted from actual observation of cases where service providers have become ill, can no longer work and one wonders whether that person had a pension fund. Others openly indicate that they have to watch their spending because they spent their lives for example as a seamstress, but now they have no pension.