The two words are often confused and used interchangeably, do these two words denote the same thing? What is the relationship? Saving as a verb, has got a bad rap, I have read people say, “you cannot save your way to prosperity” and point to inflation that wipes away returns, but perhaps we have misunderstood the purpose of savings. Without a clear understanding of the purpose of saving, then its usage will be suboptimal at best
Saving is essentially mathematics; Saving is income less consumption. For instance, you earn N10,000 you spend N9,000, you have automatically saved N1,000. Where or how you hold that N1000 is not material in terms of Saving, all we know is that you have not consumed all your income. The purpose of saving is to generate investible income by reduces consumption.
The measurable goal of savings is to increase our Savings Rate. Back to our math, if you have N1000, and you want to buy a bow tie you can find one for N10, N100 or N1000. The person who buys bowties for N10 will have a higher saving rates (not income) than the person who buys a bowtie for N1000. Saving rate is NOT a function of income earned but how much of that income is saved. To illustrate: income N10,000, Spending N9000, saving rate is (Income -Spending)/Income
Then multiply to make a percentage i.e. (10,000-9000)/10000 =10%
In the context of retirement, a higher savings rate can translate to building up a pool of income which can be saved as Additional Voluntary Contributions, allowing the contributor reach retirement income goal faster.
(READ MORE: How to know when your debts have gone overboard)
Question: if you borrow N10,000 and save N5000 of it have I saved? No. why? Because savings rate when you borrow is already 0% because the initial borrowing is already a consumption. When you borrow, you are simply spending future income. Hence, you technically cannot borrow and then save those same funds.
What then is investing? Investing is the deliberate action of deploying saved income in a planned manner to reach a predetermined objective.
There can be no investing without saving. Investing in art, it starts with asking and answering questions about future objectives e.g. When do you want to retire? The answers to these questions, assist in creating an investing plan. The investing plan selects assets that match objectives to returns and risk in an asset allocation schedule. Investing will also consider many environmental factors like inflation that are systematic to all portfolios.
Back to our example, of the RSA, let’s assume Peter and Paul both earn the same income of N75,000 and both have Retirement Savings Account (RSA) with the same PFA paying 6% p.a. On their RSA unit trust, but Paul has a 10% savings rate and Peter a 25% savings rate. After 15yers assuming all savings are invested in the RSA, then Peter would have saved just under N200,000 but Paul’s RSA would be worth close to N430,000. The lesson is that saving, REDUCES spending, and sets a lower threshold for expenses. In other words, buying a tie for N100, instead of N1000, not only frees up N900 to be invested it also reduces the overall expenses level. Reducing the expense level means the saver has a lower threshold to reach before earning enough from passive income to cover Non-Discretionary expenses.
In other words, instead of just focusing on investment return, investors should also focus on spending, bringing spending under control within set budgets. If an investor has a financial goal of buying a home in five years and has accumulated capital to invest and grow to deploy as a down payment for the home in future, then the first consideration is not which asset classes to invest in but how to consistently generate more savings to be available for investment.
The next step is then to allocate those saving in a manner that seeks to profit from volatility i.e. risk that generates real returns, while also hedging to avoid significant capital loss. These investments must be set up in a manner that allows future deposits to take advantage of cost averaging.
There can be no investment without savings.
Ranking: Top payday loan offers in Nigeria as at Q1 2020
Although banks are now extra careful with their loans, you could still get a payday loan.
Back in January this year, long before the COVID-19 pandemic had us all re-thinking our plans, Tony (not his real name) was contemplating which bank’s payday loan to take advantage of. At the time, he had a small business idea he was putting together, and the savings in his bank accounts needed to be supplemented in order to bring said idea into fruition.
Unfortunately, the young man couldn’t come to an early decision as to which bank to patronise. He uses three different banks, all of whom have different terms and conditions for accessing their payday loans.
The main reason Tony could not decide on time is that he could not differentiate which bank offers the most favourable and cost-effective loan. And because he did not decide, he ended up not being able to pursue his business venture before COVID-19 hit Nigeria.
Now, you may recently have found yourself trying to decide which payday loan to apply for, especially now that the economy is in a fix. Well, do not be confused. We’ve got you covered with this article which has ranked the best payday loans available for you; based on their terms and conditions. This ranking encompasses both traditional banks and fintech.
A quick overview of banks’ lending amid the pandemic
Do note that some banks have become really careful with the way they give out loans, considering the economic fallouts of the Coronavirus pandemic. Just last week, Nairametrics reported that as many as 17 commercial banks have approached the CBN seeking to restructure their loan books due to the adverse effects of the pandemic.
This notwithstanding, some banks are still giving out loans, especially payday loans. It all depends on whether you meet the most basic criteria – having a constant inflow of monthly income (salary) into your bank account.
Below are the best bank and fintech payday loan offers in Nigeria, based on interest rates
GTBank’s Quick Credit: Earlier this year, Guaranty Trust Bank Plc took a major step by crashing the interest rate for its quick loans. At the moment, the tier-1 bank offers the cheapest interest rate per month of 1.33%, down from 1.75%. There are no hidden charges to this loan. In other words, no management, legal, or insurance fees attached to this loan. Another reason why working-class Nigerians love GTBank loans is that borrowers are not required to provide collaterals.
According to information contained on the bank’s website, there appear to be two different types of quick loans available to both salary account holders and non-salary account holders. For the salary advance loan, applicants can get up to 50% of their monthly salary. Note that only those earning a minimum of N25,000 (for government workers) and N50,000 (for private-sector workers) are eligible to apply. It has a tenor of 30 days. Successful applicants would have their salary advance loans made available to them 24 hours after application.
Meanwhile, there is also another GTBank quick loan that guarantees both salary earners and self-employed borrowers up to N500,000 to N5 million, at an interest rate of 1.33% per month. Specifically, salary earners can borrow between N10,000 to N5 million, while self-employed customers can borrow between N10,000 to N500,000. Both categories of customers can repay their loans within 6-12 months. Again, there are no hidden charges.
GTBank customers can access these loans either through the bank’s USSD code, internet banking facility, or the bank’s mobile banking app. Eligible customers must be between 18 and 59 years old.
UBA’s Click Credit: In February 2020, United Bank for Africa Plc launched Click Credit, a time loan that was designed to help UBA customers meet their urgent financial needs. This easy-to-access credit facility makes it possible for eligible customers to get up to N5 million. Information available on the bank’s website said the loan can be repaid within a 12-month period at an interest rate of 1.58% per month. There are no hidden charges to this loan.
Application to this loan is very easy. No paperwork is required. You can apply using the bank’s USSD code or its internet banking facilities. Learn more about this payday loan by following this link.
First Bank’s FirstAdvance: First Bank of Nigeria Ltd has the second-best payday loan interest rate in the market. At 2.5%, the interest rate is fair enough. However, there is the proviso that the interest must be collected upfront, as well as a management fee at 1% flat and a credit life insurance of 0.50%.
There are other conditions to be considered when choosing FirstAdvance. Much like other payday loans, it is only available to First Bank customers. And unlike GTBank’s Quick Credit, this one is solely available to salary earners. Successful applicants can receive up to 50% of their salary, although only a maximum of N500,000 shall be made available to a single obligor.
FirstAdvance has a tenor of 30 days. The loan amount shall be automatically taken out of the borrower’s account by First Bank as soon as they receive their monthly salary.
Zenith Bank’s Term Loan: Term loan… That is what Zenith Bank Plc calls its salary advance loans or short-term loans. This loan is only offered to salary-earning professionals whose accounts are domiciled with the tier-1 bank. These customers can get loans up to 60% of their monthly salaries, albeit at an interest rate of 2.16% per month. Borrowers are also required to pay 1% flat management fee.
Fidelity Ban’s Fast Loan: Fidelity Bank Plc offers Fidelity account salary earners up to 50% of their salaries (between N10,000 and N1 million) at an interest rate of 2.95%. Customers will also pay 1% management fee, 0.25% insurance fee, as well as N100 service charge.
Prospective obligors must have consecutively received three months’ salaries and must have a clean credit record, the bank said in an explanatory note on its website. The loan can be accessed via Fidelity Bank’s USSD code.
Renmoney: This fintech company offers one of the best interest rates among its peers. Information obtained from the company’s website said both salary earners and self-employed business owners can borrow up to N2 million for a duration (tenor) of three to twenty-four months. This shall be charged at an annual percentage rate of 35.76%, which basically translates to 2.98% interest rate per month.
Note that no collaterals are needed to access these loans. Also, no mention was made of management fees or any other hidden charges.
FCMB’s Fast Cash: Both customers and non-customers of First City Monument Bank Ltd can receive fast loans to the tune of N100,000 and N200,000 respectively. Information available on the bank’s site said the loans can be accessed instantly via USSD code, with no collaterals required. There’s an interest rate of 3.5% monthly, plus a management fee of 1% which would be collected upfront as soon as the loan is being disbursed.
Page Financials’ Remit Credit: Page Financials is another fintech that is making an impact in the lending business. Information contained on the company’s site said borrowers can get up to “N2.5 million with a repayment schedule that extends to 12 months” at an interest rate of 3.76% which will be charged flat per month.
There is no management fee attached to this loan. Successful applicants can get their loans disbursed in three hours. It should, however, be noted that this fast loan option is only available to salary owners whose employers process their salary payments through Remita.
Access Bank’s Payday Loan: Access Bank Plc charges 4% interest rate, 1% management fee (flat), and 0.15% credit life insurance fee (flat) for its payday loans. Salary earners who have accounts with the bank can receive up to 75% of their salaries, or other amounts that may be approved by Access Bank.
Note that Access Bank’s payday has a tenor of 30 days. Customers can apply through the bank’s electronic banking channels, including their USSD code.
COVID-19 reveals that many Nigerians have no emergency savings
The playout of events following the lockdowns resulting from the ongoing COVID 19 pandemic shows that Nigerians do not have emergency savings
Though we are still grappling with the effects of COVID-19, it may not be too early to begin to take stock and find out what we did well during the pandemic and what we should have done better.
Almost everyone’s radar has been on the ill-preparedness or lack of appropriate response by the government, with little or no time for an inward look at ourselves.
The type of government we have in Nigeria should not have left anyone surprised at their response to the pandemic, especially when it came to the welfare of the populace. What do you expect from a government that is dysfunctional, at best?
With such government, it is time for Nigerians to begin to watch out for themselves and prepare for the unforeseen, like the times we are in currently. The playout of events following the lockdowns caused by the ongoing COVID-19 pandemic shows that Nigerians do not have emergency savings.
According to a recent publication from one of the national dailies, “Barely one month of a lockdown of Abuja, Lagos and Ogun state, millions of Nigerians had become stricken with hunger. Many could not bear an extension of the movement restrictions.” The ensuing protests were indicative of the fact that many Nigerians were living off their daily incomes with no savings to fall back on.
High Poverty Level
Many may have asked how they could save without having funds, to begin with. Agreed, the level of poverty is high in Nigeria; however, people should know that having savings is not a luxury, but a necessity. It does not have to be large, but putting aside something, no matter how small on a regular basis goes a long way in times of emergency.
I have seen images of Nigerians who surprised themselves and others with how much they saved over time in their piggy banks. There is no hard and fast rule of how much one should have in emergency funds, but there seems to be an agreement among financial analysts and planners that having the equivalent of 6 months’ expenses in your emergency savings account is the ideal.
The author of the book “Richest Man in Babylon” stated it clearly that if you do not save, it means that you have paid everyone else but yourself.
How to Start Saving
Pay yourself first: In line with the instructions in “The Richest Man in Babylon,” when you receive your monthly salary or collect that sales proceed from your business, “pay yourself first” by saving at least 10% of your collections or salary. For the salary earner, set up a direct deposit account where the money would be taken out of your pay directly into a bank savings account. By so doing, you are forced to save.
Cultivate the savings habit: Just as spontaneous buying is a habit, form the habit of saving. Do not see saving as putting aside the remnants (if any) after all your expenses. If that is your attitude to savings, then you fall into the group that pays everyone else but themselves.
One thing is certain; as long as you have the money, there will always be something that is going to demand that money from you.
Remind yourself to save: If you are a salary earner who does not want to set up a direct deposit from your paycheck or you are a businessman or woman of any means, you can set up a savings reminder around the time you receive your salary or around your peak business time.
One website that can help you with this is here. With this, you can send an email to yourself to be delivered around the time you expect to receive your pay or business income, reminding yourself to save. Just like you set an alarm on your mobile phone, you can do so with a reminder to save.
Start Small ASAP: The Bible says that if you are not faithful with small things, how can you be faithful with larger things. You do not need millions to start saving, all you need is the will, the determination, and consistency. So, start small and start now, but be consistent.
Reduce your Expenses: As already noted, one of the reasons that people do not save is because their expenses keep increasing, even when income sources are shrinking. If you find yourself in that situation (and you surely will, at one point or the other), cut down on your expenses and make them fall in line with trends in your income. Avoid spontaneous, emotional and flamboyant buying. Buy out of need, not out of want.
Why It Seems Difficult to Save: To a whole lot of people, it is difficult to save because they live in the now. This is what financial psychologists call scarcity of attention. This scarcity of attention stops people from seeing what is really important and makes them see the urgent current expenses they need to cover.
One reason why it is difficult to save is that while the expenses keep rising (out of increased need and inflation), sources of income keep shrinking or stagnating. The good thing however, is that we have the option to shrink our expenses in line with shrinkages in our income, but often times, we do not choose to do that. That is where the inability to save starts from.
Conclusion: If there is any lesson, we learned from the sudden outbreak of COVID-19, it is and should be that emergencies happen, and efforts should be made to cushion the financial impact of such emergencies by preparing for them in advance through emergency savings.
Written by Uchenna Ndimele [email protected]
7 common money mistakes I made and why you should avoid them
Don’t plan your wedding with the hope that your uncle will foot the bill. It is setting yourself up for frustration. Uncle also has his money issues that you have no clue about.
On Sunday, March 17th, 2020, Nairametrics Founder, Ugodre Obi-Chukwu, tweeted a question that has over time garnered more than seven hundred interesting responses. His question was about debt and it was straight to the point —”What was the most amount you lent out to someone and never got paid back?”
What’s the most amount you lent out to someone and never got paid back?
Mine is N550k and it’s still paining me till today.
— Ugodre (@ugodre) May 17, 2020
As you can expect with this type of question, the responses were varied and highly personal. The Twitter thread also proved one thing, and that is the fact that banks are not alone when it comes to bad debts. One of those whose responses stood out for this author is Gabriel Omin, a personal finance enthusiast. Interestingly, Mr Omin had earlier written extensively about the 7 money mistakes he made in the past, and lending is atop his list. See below.
Never Ever Lend Money Kept In Your Custody.
There is a reason you were chosen to keep the money. People do not joke with their money and so they carefully choose who keeps corporate funds. Even thieves chose trusted people to keep their money.
When you betray the trust of people for whatsoever reason, you’ve soiled your name. You will lose social capital, which is a very important capital (this is one of those, not everything that counts that can be counted). That is very hard to undo. Whatsoever happened, it’ll be hard for people to forget. My dad will not touch the original money that is given to him to keep. If you numbered your money, you will get it back the same way. Basically, you will get the same notes you gave him to keep except he took the money to the bank.
I learned this the hard way. A friend of a friend came with a need. He told me he had funds in the bank but it did not clear and the next day was a public holiday (this was pre-online banking). I loaned him money that someone gave me to keep. The person who gave me the money to keep, trusted me to the extent that he refused to sign a contract with me because he trusted me. I was supposed to get the money on the next working day, from the friend of a friend. Till today the next working day nefa reach. I had to go to the guy who gave me the money to keep for him, spoke a lot of English and paid back though I missed the day we earlier agreed. It was sad but I learned the hard way.
Avoid Impulse & Unplanned Expenses.
No budget, no spend. Spending without a budget is misappropriation. It doesn’t apply only to politicians. Have a budget & stay on it. This is the epitome of discipline. People will say what they want to say but instilling financial discipline is more important. A budget creates boundaries. Without a budget, you are on the speed lane to debt and debt…s/he is cruel. Plan plan plan. There might be surprises but a plan keeps you in order. It helps you know where you have detoured. You must not buy every AsoEbi. ATM cards are sweet to swipe but hard on the balance.
One of the ways to avoid impulse buying is to hold cash. Yes. It sounds not- so-tech in a tech age but believes me it works. When the cash is finished, it is finished. Sitting down in one place also helps. Yes o. The more the outing, the more the expense. I can feel the envy I am generating with this but na so e bi.
The Money Will Come.
You are old enough now to know that the money will not always come. Things happen. Have a buffer for emergencies. The difference between politicians & business people is that politicians do not understand why the money should not come. Business people work for money. They know that you have to make it happen. Stop planning your expense based on the generosity of strangers.
Spending Based On Other People’s Purse.
Don’t plan your wedding with the hope that your uncle will foot the bill. It is setting yourself up for frustration. Uncle also has his money issues that you have no clue about. Don’t plan to fly business class with the hope that someone else will pay. You are not on welfare. Even if you are on welfare, please bring something to the table. That something is humility.
Responsible people spend within their means. They may not have Rolexes or iPhones but they hardly ask for help on predictable things like house rent, school fees, etc. It takes 9 months to have a baby. It is not an emergency; plan for it. I take God beg you; plan.
Your kids should be in schools that you can afford. People have come to me for fees of school that my kids cannot even attend. I once headed a scholarship board and we set our requirements from day one. But parents kept coming for help in schools that they cannot afford. I mean households that both parents were not earning any income. You see what I mean by the fact that you have to contribute humility when you come to the welfare board?
Don’t buy with the hope that someone else will pick the bill. Try and agree upfront for a joint transaction. For the fact that someone paid upfront might mean that s/he expects repayment. Don’t think s/he is wicked when repayment is expected and asked for. In joint transactions, always think of going Dutch except you are advised otherwise. Err on the side of caution.
Spending Money Before It Gets To You.
Things happen. Until money enters your account, don’t go & pick something with the hope that you will pay when you get the money. That habit will lead you into the red. How about if that money does not come at the end of the day? I try not to make promises to people based on expected money. I see people start piling up debt just because they got a new job. It will distort your balance sheet if you start that way. It never ends well.
Money Sent Me On Errand.
I have seen people who were given a raise, upgrade their lifestyle in a heartbeat. Fly business class by the next day. Buy an expensive toy they never planned for. This is what happens to lottery winners. They pursue the appearance of wealth. The appearance of wealth is demonstrated when you get those things that make it look like you’ve arrived. It is the reason people take pictures sitting on cars; same reason musicians record videos in mansions and nice cars and private jets. Gang stars wear fur coats. Same when people buy TV/stereo set/gadgets with their first salary. Always allow the money to cool down. Take out time to plan what to do afterward. I have a one month rule for windfalls. They stay in the account until such a time that I have decided the way forward.
Depending on the Generosity of Strangers.
This is living life with the hope that somehow someone else will show up in the nick of time to pick your bills. It leads to living in debt and hoping that those you are indebted to will forget the money. These people can come to you with their family to thank you for the debt forgiveness you have rendered them. Meanwhile, you have said nothing of such. They always convert their debt into forgiven loans by themselves without your consent. They are experts at this. They quarrel and get contentious if you do not forgive. Money problems abound.
So, next time you think of doing any of these, have a rethink.