Thursday 6th March, 2008

Leela Ramdeen
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Becoming financially literate

If we are to promote sustainable development and economic growth in T&T, we need to develop our human resources. It is with this in mind that the Government asked the Central Bank to “spearhead” the National Financial Literacy Programme (NFLP). It was launched by the bank on January 31, 2007.

On January 22, the bank marked the first anniversary of this initiative. At this event the results of the National Financial Literacy Survey conducted in 2007 were released and NFLP’s plans for 2008/2009 were outlined. The speech delivered by Ewart Williams, governor of the Central Bank, and the full results of the survey can be accessed on the bank’s Web site:

NFLP’s vision is “to produce better informed, educated and more financially aware citizens with the skills and knowledge they need to make sensible decisions about their money. Empowered citizens can: take responsibility for their financial affairs, make ends meet and avoid unnecessary personal debt; and make provisions for a rainy day and retirement.”

As Mr Williams stated: “When the programme was launched, we emphasised that financial literacy should be the business of the entire society…We have been able to sign some 150 volunteers, many from the financial sector but other interested persons from all walks of life.”

Elizabeth Austin, project manager of NFLP, reported that individuals and organisations have volunteered their services by participating at the levels of the management committee (chaired by Mr Williams and including representatives from various key stakeholders), the sector committees (students and young adults; employees in the workplace; new and prospective homeowners; small and micro enterprises; and communities), working groups, and volunteer facilitators.

Mr Williams outlined some of the interventions made under the NFLP:

n Financial education classes were held in 140 primary schools and, in a pilot project, in 28 secondary schools.

n Seventy-five workplace “lunch and learn” sessions were held. These were sponsored by employers but with instructors and material provided by the NFLP.

n NFLP accepted invitations from several trade unions to conduct financial management seminars for employees in receipt of backpay or other lumpsum payments.

n NFLP made several interventions at the community level, mostly in rural areas.

n NFLP has used the print and electronic media and other publications to disseminate basic financial information that could be useful to consumers of financial services.

Mrs Austin rightly pointed out that “the nature of the NFLP is such that success or failure cannot be measured in quantifiable terms in the short-run. The programme initially necessitates changing a mind-set…True change will require our persistence and our patience.”

While expressing pleasure in the “auspicious start” that NFLP has made, Mr Williams recognised that “this is going to be a long journey.” He threw out the challenge to the entire community to “get on the national financial literacy bandwagon.” He listed some of the ways in which this can be done:

n “Get your employers to sponsor lunch-and-learn sessions in the workplace.

n “Volunteer to organise and provide financial literacy classes to your community groups, groups within your faith community, and your social clubs.

n “Teach your kids good financial habits and seek to get financial literacy as part of the school curriculum.”

CB is also seeking to encourage sixth-form students to join the programme “to provide instructions to their peers and to other students.”

The results of the baseline national literacy survey, which was initiated to give NFLP “a general idea of the current level of financial literacy in the country,” are worth studying. The survey, which was conducted between July and August 2007, involved approximately 1,000 households and covered several areas including: money management, spending and savings habits, financial vulnerability, planning ahead, crisis management, use of financial products, insurance protection, and retirement planning.

n Gender of respondents: 42 per cent were male and 58 per cent were female.

n Marital status of respondents: 47 per cent married/common law relationships, 35 per cent single, ten per cent widowed, four per cent divorced, four per cent separated.

n Age distribution of respondents: 16-19: nine per cent; 20-24: nine per cent; 25-34: 16 per cent; 35-44: 19 per cent; 45-54: 15 per cent; 55-60: seven per cent; 61+: 25 per cent.

n Occupation of respondents: six per cent students, 33 per cent employed full-time, 14 per cent employed part-time, 18 per cent housewives, 16 per cent retired, nine per cent unemployed, one per cent on-job training programme, two per cent disabled.

Type of employment of respondents: 76 per cent were employees, 23 per cent were self-employed, one per cent not stated.

The following are some of the findings:

n Twenty-three per cent of the sample respondents, females, were less likely to make ends meet (23 per cent vs 18 per cent males).

n Those who are separated (32 per cent) have the highest incidence of difficulty making ends meet.

n Based on the sample, the ability to make ends meet is directly related to education: 12 per cent of those with tertiary education have difficulty in making ends meet; compared with 39 per cent of those with technical vocational/apprenticeship.

n Only 25 per cent set aside funds specifically for unanticipated expenses, eg job loss, illness.

n However, 78 per cent plan ahead for “lumpy” payments, eg water rates, land tax etc.

n Nine per cent don’t plan ahead.

n Forty-two per cent run out of money before the end of the week or month at least “sometimes.”

n Twenty-one per cent have no bank account.

n Fifty-six per cent have no protection against their person or property.

n One in three (33 per cent) people over the age of 60 continues to work because they need additional income.

n Fifty-four per cent of retirees do not have an occupational or personal pension. The main reason for not doing so was lack of money.

n Almost half of retirees (45 per cent) report that their current household income was insufficient to give them the standard of living they hoped to have in their retirement.

n Sixty-nine per cent are relying on government pensions (NIS/old age) for their retirement income.

As Mr Williams said, the survey’s results will also help NFLP “to make more targeted interventions” as the programme moves forward. NFLP also plans “to conduct follow-up surveys to track the progress being made under the programme.”

If we are to move forward as a people, it’s essential that we all become financially literate. Contact the NFLP secretariat at 625-2601, ext 2815 for further information.

n Leela Ramdeen is a lawyer

and education consultant

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