My friend posted this video on Facebook. It features 20 year old Brendah Wacuka from Kenya speaking about financial literacy and it sparked the idea for this blog post. In an era of rampant consumerism and guerilla marketing, it's very easy to get caught up in the acquisition of material things instead of saving and investing. I would be overstepping my bounds by telling people what to do with their hard earned money but I can't help but point out the disconnect in wealth between those who consume indiscriminately versus those who produce, the chasm between those who spend frivolously and those who invest.
I'm sure in every Caribbean society there's the story of the poor man or woman who started out selling in a handcart or at the side of the road somewhere . They started small and plugged the profits back into the business until they either amassed a veritable fortune or spearheaded a formidable business empire. More often than not these people are Indian or Syrian or Chinese. There's a running joke about Indians and their ability to get rich ... Indians, Syrians, Chinese, everyone but people of African descent.
Is it that those ethnicities have an inherent knack for multiplying their money? Do they have innate skills for managing finances? Do they have secret networks and support systems that prop up their businesses? Is it that they have a sense of kinship with their brethren and share the gains, the hard work and the profits? Is it that they know how to work collectively? Is it that they are better at exploiting opportunities or taking risks? Who knows?
It is not my intention to ignore the historical and economic realities that have fostered the success of certain groups. Slavery was a handicap for us but how long are we going to focus on that. Why aren't more black people in the Caribbean creating wealth? Is it that they are selfish, lack discipline and vision and are particularly susceptible to "crab in a barrell" mentality? I reject these stereotypes. I suspect the differences lie in cultural upbringing.
When I worked at a commercial bank in Barbados I could never convince the Indians to take a loan or credit card, they scoffed at the idea of consumer credit and vehemently eschewed the idea of incurring debt.Loans, hire purchase and credit cards while seemingly a gateway to your dreams, are trojan horses because they come bearing interest. Interest payments escalate very quickly and may (if you're lucky) have you repaying up to 2 and a half times the money you initially borrowed. Are you horrified yet? Imagine if you were able to retain even half of what you paid to service that debt. I suspect the Indians are onto this secret. The Syrians and Chinese have similar ethics. I'm not sure how they get the money to fund their enterprises but they tend to be very frugal and big on entrepreneurship. You seldom find them slaving away in someone's office, they own their businesses. There must be some correlation between this and their financial success.
Some people don't save, and those who do, often don't know how to balance their saving with investments. Most people put away money for a rainy day but do not actively work on multiplying that money. The topic of financial literacy is important to me so I won't let racial stereotypes skew my discourse any further. Whatever your race or class financial habits whether good or bad are learned, so there is hope for us all. Saving is important but we must go beyond this. When you work hard for your money its important to put your money to work for you too. It is easy to develop a misguided sense of entitlement and blow it all by saying "I work hard for this money so I should reward myself with (insert whatever material commodity is hot right now)". Wise financial decisions are necessary, depreciating assets not so much.
Notwithstanding, saving may not be all that it's cracked up to be. If you deposit your money in a commercial bank in St Vincent they will pay you an interest rate of approximately 2.91 - 3% on your deposit.The bank will then use the money you have deposited to fund loans, but the banks charge an interest rate of approximately 9% on consumer loans . That, my friends,is called arbitrage and that is how banks put your deposits to work and make money. I am not saying not to save, having a cushion of savings increases the options available to you. Do the math, you would be well advised to put your money to work in something that's lucrative for you and not just the banks.
Good or bad financial habits are learned and therefore can be unlearned. Practical, straightforward courses at the grassroots level, which teach people financial literacy and how to monetize their skills and talents would be welcome especially here in the Caribbean. These are practical life skills that should be widely taught, wealth management shouldn't be some mystical, elusive goal. The children of the education revolution are returning from university, they are educated, enlightened (I hope) and they have spending power. Significant developmental gains would ensue if they are taught how to leverage this. At the very least, it would take some of the mystery out of money management and would help people who can't avoid loans and other forms of consumer credit to make informed financial decisions.
In the wake of the CL Financial fiasco and other economic meltdowns I have a healthy scepticism of financial institutions. I'm not trying to fritter away my money or give an unscrupulous money manager the opportunity to exploit me however I can't just throw up arms and bury money under my bed. My eyes tend to glaze over at the thought of stocks/shares, bonds, portfolios and net worth, it can be so abstract! The process of demystifying investments seems complicated and a bit daunting but I am committed to understanding wealth management and finance. I am no financial whiz but I am now widening my focus and considering entrepreneurship as opposed to mutual funds and stocks and bonds as future options for investment. I'm in the middle of getting a Legal Education Certificate but I find myself increasingly drawn to entrepreneurship, if I could find a way to combine both that would be perfect. I would be lying if I said I had it all figured out but it's a work in progress. One of my ultimate aims is to navigate my way to that perfect space where savings, investment and sheer entrepreneurial tenacity make me fulfilled, wealthy and debt free. Formidable, I know, but still achievable.
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