certain countries, there is a periodic release commonly
referred to as the Consumer Confidence Index. This measure
reflects the attitudes of consumers with respect to the
health of the economy, based on what they hear. It tends
to focus on business conditions and job markets.
If consumers feel good about their current situation, and
future well being, they tend to spend freely. Free spending
fosters economic growth.
On the other hand, if consumers are not confident about
a prosperous future, because of job insecurity, or other
factors, there will be a tendency to save more and spend
Less spending slows economic growth.
There are a few types of measurements that poll the sentiments
of consumers. One survey investigates the level of confidence
that consumers feel with respect to big
ticket purchases, such as motor vehicles and furniture.
Another survey seeks to identify willingness to spend dollars
on short term purchases, like vacations. Yet another has
as a focal point the consumers worries about job security.
The Consumer Confidence figures have been falling in the
US, primarily due to the loss of jobs resulting from hurricane
destruction, rising fuel prices, and political uncertainty.
As the Fed raises interest rates, in a bid to check inflation,
there is even greater uncertainty, and the Christmas shopping
season there, does not expect free spending.
If they are focussed on savings, then we on the periphery
need to align our visions with the developed world, since
the ripple effect is likely to catch us in the lurch, should
If we were to poll consumer confidence, with respect to
the unparalleled acts of crime levelled at the business
community and their families in terms of kidnap rates, one
can only imagine the measures that could manifest from a
The thing about savings advice is that the savings ethic
has to be evident in the one giving the advice, in order
for those receiving the advice to be convinced and so take
action. Similarly, those seeking to control crime, and raise
consequential consumer confidence, must appear to be clean
as a whistle.
It is amazing how human behaviour is intricately intertwined,
one dynamic with another. It is equally fascinating how
quickly we loose focus, and how visions can blur, independent
If consumer confidence is polled and shows up as an all
time low, there would be justification to slow the spending,
and stash the cash in safe, low to medium risk, investment
Ironically, when inflation is climbing, and jobs are being
cut, a kind of scramble
ensues, and necessary purchases jostle for priority. Often,
there is nothing left over to save.
Or so it seems, until someone announces that it is guava
season. Thats when you simply have to find places
to save a few dollars, each month, in places where you simply
cannot touch the build up.
Bank savings vehicles are typically short term. You can
dip in and draw out all, in one to two years. Mutual funds
ought to be medium to long term, but there is usually no
penalty to withdraw or sell the units.
Such ease of access is a recipe for short term consumption.
There are two common vehicles that
fit the bill for long term savings: cash value life insurance
and pensions or individual
We simply cannot wait for things to get better, before we
structure our long term savings agenda. Our confidence or
lack of confidence in the systems that surround us, will
manifest, its own monster, but we should not be dragged
Ahmed is a registered financial consultant