with Raziah Ahmed
wise man was reported to have said: Blessed is good
wealth (earned honestly) in the hands of a righteous man
and For you to leave rich those who inherit from you,
is better than leaving them poor.
It has always been said that there are two ways to make money:
first, you can work for it, and second you can invest savings.
The essence of accumulating good wealth must, therefore, be
honest work and prudent investment.
The acute problem for persons most at risk of falling into
poverty is the syndrome of too much month for the money.
These are persons whose monthly income is consumed before
month-end, and who live on credit facilities for the rest
of the month. When the next pay cheque comes, it is used to
pay off the debt, and the cycle is a vicious one.
Credit card debt is a typical example of this vicious cycle,
and this is debt that incurs interest charges at rates of
18 per cent to 25 per cent in todays market. In fact
the raison dêtre for the banking industry is not
so much to keep your savings in a safe place, but, more to
generate profits from lending your savings.
The common lending vehicles are credit cards, mortgages, renovation
loans, business loans, overdraft facilities, and education
For persons in the too much month for the money
syndrome, short-term savings appear to be a prescription for
failure. As soon as the quantum becomes attractive, it tends
to be consumed in things Ive always wanted,
like a vacation, or a big screen TV. The problem is easy access
to the money!
Hence the reason for medium-term and long-term savings structures;
it is a psychological play. If we are unable to touch it,
we will probably not want it, and it grows when we forget
You must look, therefore, for a savings programme that bears
surrender fees or charges, if you break it. The fees must
be very high in the early years, to avert any desire to consume
What kinds of savings for the medium-term carry charges? Trust
funds are a good example, so are non-registered annuities.
Trust funds carry trust fees, and charges that cover administration,
and are commonly structured to pay out only after a certain
period of time has expired.
Non-registered annuities are somewhat like individual pension
plans, but they do not qualify for a tax shelter (like individual
annuities) and you do not have to wait until the minimum age
of 50 years to get the money in hand (like individual annuities).
Because the money stays in the account by force of the huge
penalty for withdrawal, the returns tend to be higher that
ordinary savings accounts and CDs (deposit accounts in banks).
For example, leading non-registered annuities require a minimum
of eight or ten years during which you should leave the money
(or incur huge charges if you dont), but they pay in
the vicinity of eight per cent return on small sums of money
invested periodically. Such sums can be as little as $500
a month, or $5,000 a year.
You can also get plans in the market that do not impose a
penalty if you cannot maintain the periodic investment sums.
In fact, you must avoid those plans that will erode your savings
if you are unable to keep up the payments. Wealth is a good
thing for all of us.
Indeed, an ancient poet once said: Save your money,
for with wealth comes respect, and you can do without asking
uncle or cousin.