World Savings Day, which was marked on Thursday, October 31, was established to encourage people all around the world to increase their savings through the banking system.
Earl Jarrett, General Manager of the Jamaica National Building Society, says the day is particularly meaningful to Jamaica, and the wider Caribbean, as residents of these countries share some of the lowest savings rates worldwide. He said that this low rate is linked to the public’s generally limited access to financial services and the lack of a cultural emphasis on saving.
“Jamaica needs to urgently address the problem of its low savings rate,” Jarrett said. “Many of the economic challenges facing the country are intimately related to this issue.”
The Singapore based EconomyWatch.com website indicates that Jamaica’s Gross National Savings, as a percentage of its Gross Domestic Product (GDP) in the year 2013, was 15.9 per cent. For Trinidad & Tobago the figure was 24.7 per cent, while for China it was 47.1 per cent.
The website estimated Jamaica’s GDP growth rate in 2013 at 0.6 per cent, while for Trinidad & Tobago it was 2.0 per cent, and for China it was 8.0 per cent.
“Jamaica’s low growth rate is directly tied to its low savings rate,” Jarrett said. “Savings is the key determinant of domestic investment, which underpins growth.”
Started in 1924 by the World Savings Banks Institute, World Savings Day is used to inform the public about the relevance of saving to the economy and the individual. There is a particularly strong focus on developing countries, where a large percentage of the public is often unbanked.
More than three out of every four Jamaicans have limited access to safe and low-cost payments channels, according to economist Dr. Dawn Elliott. A comprehensive research survey, which she headed, showed that only 12 per cent of the population own the types of accounts which allow them to transfer money, write cheques or make credit card payments.
“Most Jamaicans make payments using cash,” the Associate Professor in the Department of Economics at Texas Christian University told a 2011 Mobile Financial Services Conference at The University of the West Indies (UWI) Mona. She said Jamaica has a hidden problem as the majority of the population own bank accounts; but only a fraction of this group has access to the financial services, which allow them to participate easily and effectively in the economy.
The survey, contracted by Solutions for Society, a think tank of the UWI, showed that 34 per cent of the adult population does not have bank accounts and use cash, or non-bank payment outlets at relatively high costs. In addition to this group, she said that almost 80 per cent of those who own a bank account cannot make payments easily or conveniently, as they do not own transaction accounts.
“The situation facing Jamaica in 2013 comes despite some national efforts to encourage saving,” Jarrett said. Started in 1971, a National Saving Committee was established and its program evolved to the point where primary schools across the island had savings clubs, and students learned about saving and money management.
Subsequently, Jamaica National started its dedicated School Savers Program, for basic, primary and high school students. Hundreds of schools and more than 100,000 student savers participate in this program, which is a direct outgrowth from the seeds planted in 1971.
“In May 2001, we developed a special account for children up to 15 years old,” said Denise Gocul, coordinator of the JNBS School Savers Program, adding that this option was intended to provide an entry point for students into the formal financial system.
Studies show that children from a wide cross-section of Jamaican households get cash gifts for birthdays or special occasions, which can be saved. Many also receive allowances and lunch money, portions of which can be put aside for saving.
Students need to think about the financial implications of their education, and the cost of going to a college or university, Gocul said. “Not all of them are going to have parents who can pay for that.
“Children often start saving with a ‘piggy bank’ and then graduate to a formal account as their savings habit develops. This is critical as the patterns you learn as a teen, often stay with you through life.”
“We are proud of the impact this savings outreach has had for our youth population,” Jarrett said. “We offer a raft of services to financially empower our members, after they access our network.”
Jarrett said young students who learn good savings habits usually enjoy greater financial stability and success as adults. Likewise, countries with solid savings profiles generally show healthy trade surpluses and buoyant growth subsequently.
“Social pressures generally push individuals to spend when they should be saving,” he added. “For our own good and for that of Jamaica, we need to reject this, and World Savings Day is a good point of departure.”