Across Nigeria, children are heading back to school this week, after nearly two months of school break. While this is a good thing, it can also be a source of financial concern for parents. This is especially so for young parents, many of whom were just students a few years ago. Some of these millennials-turned-parents have only begun to pay school fees for the first time in their lives, and they are not finding the expenses funny.
Imagine this scenario
Segun and Ifeoma (aged 29 and 27 respectively), got married in 2013 shortly after their university days. They welcomed a set of twins a year later and have since birthed one more child. Fast forward to 2019, the twins are aged five years old and already in primary school. What this means, is that the young parents must cough out thousands of naira in school fees for the twins every school term.
Due to such factors as a bad economy, lack of high-paying jobs, and the high unemployment rate in Nigeria, these young parents earn average salaries that can barely take care of their needs. For instance, while Segun’s monthly take-home as a medical doctor is N250,000, his wife earns about N150,000 as an Executive Trainee in a bank. Together, they manage their joint monthly income to take care of a range of expenses such as rent, food, clothing, medical bills, extended families’ needs, and most importantly, their children’s school fees.
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Why school fees are burdensome to millennials-turned parents
The truth is that most public schools in Nigeria offer low-quality services at affordable rates. Therefore, to get quality education for their kids, parents must be willing to spend more. The situation, however, becomes problematic when young parents such as Segun and Ifeoma must squeeze from their earnings to pay these high school fees, bearing in mind that they have a long list of other expenses.
In the early to mid-2000s, Segun attended the Federal Government College at Ijanikin, Lagos. There, the tuition was relatively affordable even as the quality of education was manageable. Now that he is a parent; he knows better than to send his children to public schools, except for a select few anyway. Consequently, he and his wife must bear the cost of sending their kids to private schools where the fees per term are often as high (if not more) than his salary.
How can millennials cope with the high cost of educating their kids?
In a 2018 LinkedIn article which remains relevant till date, financial expert, Damilola Alonge, explained in detail how millennials can best manage the cost of training their children in school. According to him, the answer is simple – young parents should “start building an Education Fund today!” He advocated that every millennial should do this, whether or not they currently have kids.
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Why you need an education fund for your kids
The answer is simple – it is a very smart thing to do. Simply defined, an education fund is money set aside for the purpose of investing in your children’s education. Once again, this is a very wise thing to do because as you may well know, availing a child the right to proper education is one of the best investments any parent can ever make, especially in this part of the world.
It is best to start building an education fund early because the older your children become, the costlier it is to educate them. Starting an education fund for them means that as they grow older, you can easily be able to pay their school fees without becoming overwhelmed.
Let’s get back to Segun and Ifeoma for a second. Their twins’ education will become much more expensive as they graduate to secondary school and then to the university. If the young couple starts now to have an education fund for their children’s future education needs, they’d have a lot of burdens lifted off their shoulders some ten to fifteen years from now.
How the education fund works
Just to be clear, establishing an education fund for your children’s education has nothing to do with opening an account and dumping money in it. Far from it. Instead, it is all about investing. Alonge recommends defining a fixed timeframe between now and when you’d need the money to start paying school fees.
You will also need to factor in the kind of university you’d like your child to attend, as well as how much it currently costs to send a child to such a school. Doing all this will help you know how much of your monthly salary you will need for “investing in a mix of asset classes like equities, fixed income, USD assets, real estate, mutual funds, etc.”
For instance, if Segun and Ifeoma want to start an education fund to take care of their twin’s tertiary education, they can come up with a 12-year investment plan – 12 years representing the timeframe between when the kids will finish with their primary and secondary education before proceeding to the university.
Upon starting the education fund, professional investment/financial planners can then help the couple to monitor the growth of their investments towards the purpose for which they have been made.
African leaders should support MSMEs for rapid recovery of economies – Report
African leaders would help speed up the recovery process in most African economies if they can continue to support the MSMEs.
African leaders have been enjoined to promote and support policies that would strategically support the Micro, Small and Medium-sized Enterprises (MSMEs) and speed up the recovery process in most African nations.
This was stated in the Foresight Africa 2021 report, a publication of African Growth Initiatives of the Brookings Institution, a non-profit organization devoted to independent research and policy solutions.
According to the report:
- “Policymakers must continue to support businesses—both smaller enterprises and larger firms—that have been disrupted by the crisis.
- “Arguably, the greatest priority must be to bolster the micro-, small-, and medium-sized enterprises (MSMEs) that are key to African commerce and account for 83 percent of private-sector employment in Africa.
- “Such businesses, which number between 85 million to 95 million, are especially vulnerable to COVID-19 mitigation measures given they are often characterized by person-to-person contact. By just May 2020, 75 percent saw their revenue decline by over 30 percent.
- Finance will continue to be one of the greatest needs for African businesses; indeed, only 5 percent of MSMEs across the continent feel they have received adequate support from lenders. Provided governments navigate Africa’s fiscal challenges with skill and determination, they can continue offering suitable financial support to small enterprises; in addition to indirect support through value chains and banks, such assistance might include loans, debt forgiveness, low-interest rates, assistance with payments to suppliers, and reduction in utility costs.”
Ways Governments can provide financial support to MSMEs
- “There are several steps that governments can take to provide financial support to MSMEs. One option is to assist MSMEs through larger firms in their value chains, which might include upstream suppliers and downstream buyers.
- “Governments can provide easier liquidity and working-capital terms to these larger players, and they can make such support conditional upon these firms’ providing favourable financial terms to MSMEs.
- “Governments can also consider providing risk guarantees or first-loss mechanisms while requiring banks to on-lend under the chosen set of criteria and guidelines in order to encourage banks to lend to MSMEs.
- “Policymakers must not lose sight of the region’s informal sector, as 84 percent of African MSMEs are unregistered. Policymakers can take advantage of the opportunity created by the crisis to convince larger numbers of informal enterprises to register, and thus gain better access to finance and markets. Moreover, to promote registration, governments could shape bold campaigns and attractive packages, potentially including multi-year tax holidays and capacity building for MSMEs.”
Why this matters
- Micro, Small and Medium-sized Enterprises (MSMEs) are widely recognized for the important contributions they make to sustainable development, in terms of contributions to economic growth, creation of jobs, provision of public goods and services, as well as poverty alleviation and reduced inequality.
- The pandemic has seriously impacted the MSMEs in all African nations as it has exacerbated economic hardship and may have pushed more than 40 million Africans into extreme poverty.
- It is imperative that the African leaders focus on enabling businesses to respond effectively to these new and unfavourable conditions to which most MSMEs have been exposed to.
How to fund your business without a debt sentence
The lack of funding is a great excuse for people who are not really ready to start a business.
According to Mark Cuban, one of American’s entrepreneurs, owner of Dallas Mavericks, and TV Personality, the biggest mistake most people make is to think that they have to raise money to start a business.
As a financial advisor, I totally agree with Mark. There is no such thing as a successful business that became successful because of funding. Yet every week I receive tons of emails asking for advice on how to raise money or if I would invest in their businesses.
The answer always is “No” and you will discover the reason at the end of this article.
While I understand that certain businesses genuinely do need funding, and while funding is necessary at certain stages in a business, I do not think that every business needs funding to get started. And in fact, the majority of funding needs are not real funding needs, but the lack of ability to create money from thin air.
Most Funding requests are disguised gap in creativity and sales skills. Because with the right sales and creative skills, you can create the amount of money that you want. And you can also break down your business into the version that you can fund with your own money.
Thus funding problem is majorly disguised creativity and sales problems. And quite frankly the lack of funding is a great excuse for people who are not really ready to start a business.
I know this because great entrepreneurs are not stopped by funding challenges. And the greatest entrepreneurs in the world all started in spite of funding challenges.
Amazon started out from the garage of Bezos’ in Bellevue, Washington. He started out with funding of almost $250,000 from his parents.
Facemash now Facebook started in 2004 by Mark Zuckerberg and a group of friends. They started out with sweat equity, technical skills, and the ability to sell their idea and build a solid community.
Apple started out in Jobs’ garage on April 1, 1976, by college dropouts Steve Jobs and Steve Wozniak. They started their business with sweat equity, technical skills, and the ability to sell a not so perfect Apple 1 product without a monitor, keyboard, or casing.
Bill Gates and his business partner Paul Allen built the world’s largest software business, Microsoft, from technological innovation, keen business strategy, and aggressive business tactics.
You will find a similar story for Elon Musk, Mark Cuban, Richard Branson, Dangote, and so on.
These men built their businesses from the ground up with sweat equity, the right attitude, personal savings, or support from families. Funding did not stop them and funding will not stop you if you are serious about entrepreneurship. Quite frankly funding at the early stage of a business increases business stress, dilutes control, and expands leadership complexity.
So while you may fantasize about some strange investor sent by God coming along. To lift your business off the ground. In reality, this rarely happens. You must find ways to fund your way to a proven business model. Investors rarely fund ordinary ideas or struggling businesses. They fund businesses that are already succeeding but need funding to expand that success. This is why banks rarely lend to SMEs but do so easily to successful businesses. And why the majority of successful business owners started off on their own
So why do people still waste time looking for funding?
People gravitate towards funding for three reasons. The first is the Fantasy of overnight success. The second is the desire to use another person’s money to fix fundamental problems. That can only be solved through discipline and hard work. And the third is to make an already successful business even more successful.
Among these three reasons, only one is of interest to the investor. Investors are not on a mission to rescue your business or make you rich. They are on a mission to increase their wealth and achieve more financial success. They will only invest in businesses that can help them achieve their goals. And until your business develops this capacity you are not yet funding worthy.
Thus the only purpose for funding is to transfer investor’s idle funds or funds that are less optimized to a profitable business vehicle. That has the capacity to generate higher profits. This means that your business must have the capacity to turnaround investors’ money very quickly. If your business is not yet at this stage. You should focus on bringing it up to this stage and then attracting investor’s funding can become easy for you.
The key to successful funding is to answer the three funding questions. First, is my business fundable? Second, do I need funding for wealth-creating purposes? And third is my business at the stage where it can turn around investors’ money without losing it? Answering these questions is key to funding your business.
A business is ready for funding when it has certain key attributes. There are seven key attributes that attract investors and make a business funding worthy.
Watch out for the next part of this interesting series
Grace Agada is The Senior Financial Happiness Director @ Create Solid Wealth. She is an Author and Column Contributor in Six National Newspaper. She is a contributor at BellaNaija, Nairametrics and Proshare and she is on a mission to help working-class professionals and CEOs become more financially successful. To learn more about Grace and how she can help you send an email to [email protected]
How to reduce your electricity bill in Lagos
Find out a few tips on how you can reduce your electricity bill.
With the recent hike in electricity tariff, everyone is looking for ways to cut costs, especially if you already have a prepaid meter installed at home. Currently, the new tariff increase since October 2020 is over 100%, meaning everyone would start paying twice what they previously paid.
Things are hard enough as it is especially in a place like Lagos, and if you don’t plan to pay double, you have to adjust accordingly. Although you would certainly pay more, but knowing how to reduce your electricity usage in Lagos would do you a lot of good. Read on to find out a few tips on how you can reduce your electricity bill.
How to Reduce Your Electricity Bill in Lagos
To start with, you should know that for these tips to work for you; you need a prepaid meter installed. Without a prepaid meter, your bill pretty much runs on estimates and leaves you with little room to contest its accuracy. If you want to save power, start by getting a prepaid meter installed at home.
After that, here are a few tips on how to reduce your electricity bill in Lagos:
1. Sniff out background power consumption:
Many don’t know this, but turning off a device while leaving it plugged in does not cut off the power supply. The device still consumes residue energy called vampire or stand by power. To avoid this, cut off power to a device by turning off the socket and the device’s power switch.
2. Replace all your bulbs at home with energy-efficient models:
Although non-energy-efficient bulbs are cheaper to purchase, they become more expensive in the long run to use. This is because they consume far more power than energy-saving bulbs. For example, the average wattage of an ordinary bulb is around 60 to 200. However, energy-saving bulbs are as low as 7 to 11 watts. This means that one would consume more than ten times the other’s power; the choice is yours. Also, it would help if you become more cautious with how long you leave your bulb on. Turn them off during the day, and when you want to sleep at night; especially your kitchen, toilet and bathroom lights. Only leave security lights on.
3. Limit your fan and Air conditioner’s runtime:
The ceiling fan is one of the home’s highest passive power consumers. You might not know it, but your fan practically runs all day and night, which significantly impacts your power bills. One thing you can do is replace all your fans with energy-efficient models if you have the means. However, if you don’t have the energy-efficient model, simply regulate how long the fan runs. The energy-consuming capacity of an air conditioner is well known. Keep it running for a day, and it would make a telling impact on your bills. A 1.5hp (1119watts) Ac running for 10 hours at a rate of N60 per kilowatt would cost you well over N30,000 alone. You can shuffle run time between your fan and air conditioner, depending on how many units you purchase per month. Limiting your fan to running only about 8 hours a day can save you hundreds of naira.
4. Revisit your refrigerator:
This is another appliance that consumes the most power at home. The average watt consumption of a refrigerator is 1200 watts per day (depending on the model), which means they consume one of, if not the highest power at home. You can reduce consumption by purchasing a smaller freezer, which is the more expensive approach or doing the following:
- Move the refrigerator to an area with adequate air circulation, as it helps it become more power-efficient.
- Your fridge should also be at least 2 inches away from the wall and not stand directly exposed to sunlight.
- Another thing you should do is not stuff up your refrigerator. This reduces the overall efficiency of the unit because of the lesser space available for air circulation. It also means that the unit would draw more power to meet the demand. Ensure you defrost the fridge regularly too
Asides from the tips mentioned in this article, you should also sit down to study your home. If possible, create a list of all your appliances and their watt rating. Start trimming down consumption by replacing the device with a more energy-efficient model, or reducing its use.