Importance of savings: Bitter lessons from Covid-19

By AHAMEFULA NJOKU

The present and future consequences of COVID-19 has again brought to the fore the importance of having savings, investments and strategic reserves by every individual, company or even a country.

Five things are bound to happen during and after this pandemic.

Most countries will go into economic recession.
There will be a cut in salaries in some companies.
Some workers will lose their work.
There will be inflation in many countries. (As Central Banks announce stimulus packages, which means that money is being printed without being backed by productivity)
Some businesses will collapse.

The countries that will bounce back quickly after the pandemic are the ones that have a lot of savings and strategic reserves. ( Surplus foreign exchange and robust Sovereign Wealth Fund. For example China and some Scandinavian countries)

However on an individual level, those people who are working and were wise enough to embrace savings and investments will be better off than those who have no savings at all.

You must have noticed the mild protest against ”stay at home” orders across the world. The simple truth is that most workers stubbornly refuse to heed to the time tested financial advice by experts that a worker in his own best interest must have in his savings at least three months equivalent of his income as a cushion against a loss of job or an unexpected development.

Do not think that this advice is for the low income earners alone. There are many ”well paid” people or professionals who fritter away their pay check or income as soon as they receive it mostly on irrelevant items.Their lame duck excuse is often that ”My salary or income is not enough.” No income will be enough unless you discipline yourself to live below your income until you can improve on it.

As you can see many people were finding it difficult to stock pile essential items and food as many countries announced 21 says lock down because of lack of savings.

But l guess going forward that the intelligent ones amongst us will learn from this bitter experience. As the saying goes, ”experience is the best teacher.”

Njoku, a lawyer is the author of Nigeria’s fastest selling book on Personal Finance , ”The Millionaires Curriculum.”