We are good at making money, but can we save?

Deputy General Manager of the National Savings Bank, Mr K K V V L W Karunathilake says now, more than ever, it is important to save.

World Thrift Day is observed on October 31. With Sri Lanka as a country struggling to make ends meet, the savings giant in the country, the National Savings Bank, is in a drive to raise awareness throughout October – thrift month – to make people aware about the importance of savings. “We encourage people to save. Every year we mark World Thrift Day in our efforts to increase the savings habit in the country,” says Mr K K V V L W Karunathilake, Deputy General Manager - Marketing and Recovery, of the National Savings Bank.

The bank has many events lined up during October to encourage people to save. This year on October 1, NSB is introducing the revamped Prarthana Plus account. “With the current situation of high inflation, we thought to give people the opportunity to save. We revitalised the existing product Prarthana to Prarthana Plus by offering an attractive increased interest rate on savings. Prarthana Plus is an ideal product for adults to save for 20 years down the line. If you don’t have a fixed pension this is a good product for your sunset years.

“As a people, our nation tends to look for shortterm gains rather looking towards the future. I think this might be true for most developing countries. Being a responsible bank, we must encourage people to invest and save money at a safe place which’ll enable them to wither difficult times.

“With the current situation, specially with the high inflation, people are not attracted to save. This is a problem. If we look into history, savings have not been a priority for our people, throughout the past we’ve been consuming more than what our income lets us. This has contributed in leading us to where we are now. Our savings rate is very low (26.7%) even compared to other Asian countries like Bangladesh (36%) and Nepal (32.6%). We must increase our people’s financial literacy. If you look at the Gross Savings Rate at a developed country like Singapore it is at 44%, so we can understand how

far behind Sri Lanka is.

“People think they cannot save money because of some widely held misconceptions. You think your expenses are more than your income. This may be because our expectations are too high. If you really do think of saving money, you can save money, it’s as simple as that.” I recently saw a tweet by Elon Musk, it simply said… If you want to clean your room in 3 days you’ll be doing that right.. say if you have to do the same task in 3 hours you’ll still do it, it’s just that you should have that special voice in your head and the motive to do so.

Mr Karunathilake points out that even a person not earning money can save. “If you are the sole income earner in your three-member family, it’s safe to assume the other two are spending money. So those who are spending money, can save money.”

“We must start the saving habit at a young age. Even school children can save, this is why we have savings units in most schools – run by schoolchildren themselves. Every student has pocket money, so if they want to save, even Rs. 50 is good, multiply it with number of school days per year. Children’s savings habits are different; in this digital age they are more interested in saving through bargains. We have 4 million students in our country; so if one student saves Rs1 a day, that’s Rs40 lakhs saved daily. This the savings concept.”

NSB conducts regular customer forums and savings events; “At school level our marketing officers address children. Every year there are new entrants – we open an account for them by putting in Rs 500-1,000. Parents, teachers and the Education Ministry supports us.

“Whatever education you have, whatever job you do, or how much you earn is of no use unless you have the thrift and savings concept. I have watched highly educated, one-time high income earners who have passed retirement age and are now suffering. These people have spent what they earned and are now dependent on their children. Maybe they spent their whole EPF/ETF on children’s education abroad, or on lavish weddings, and once they reach 70-75 years of age, they have nothing for themselves. What people don’t realise is that medical costs go up with age. With no source of income how can you survive without any savings? We are going around the country to raise awareness among the older generations about saving. Our slogan is “Aruthbara, Suwabara, Vishrama Diviyak”. If you consider that we live to be 80 years, that’s 20 years we have to live after we have stopped earning (if you consider retiring at 60). With inflation, the real value of money goes down. A pension might not be enough to live on.”

“Our country is in an unfortunate situation; when each and every person is poor, then the country is poor. People have become poor by their practices and culture."

Mr Karunathilake is a firm believer that if you are really interested in saving, anybody can save money. “We have to save money for various reasons. Maybe an unexpected opportunity comes up; the person with money gets more opportunities than someone without. If you want to buy a land, and you have money, you can bargain, or you get an advantage over other buyers. There’s expected and unexpected expenditure but the income is fixed most of the time. Expected expenses are insurance premiums, education etc. Unexpected expenses may arise due to illness, or natural disaster. Having some money set aside will help you rise back again faster. We saw this when the tsunami happened. We saw this when Covid happened.”

When it comes to savings in the country, another problem area is where business people are concerned. “They invest all their money back into the business. But you must have liquidity. You must have money in the bank. We don’t know what will happen to our business. We saw how everything ground to a halt when the pandemic hit. Business people had goods, inventory, but they couldn’t sell. They couldn’t pay staff salaries.”

“To safeguard our comfort zone, we must save money. Whatever your level of income, whatever your wealth, you have to have money in the bank. As Lord Buddha said “Apada su bahisvathi”. Our savings give us freedom: It enables us not to be dependent on anyone. If you have financial independence you will be mentally healthier, you are more content and confident. And this has an effect on your physical well-being too. Remember this, we as a nation or as individuals are not free and independent till we are financially stable” .

Mr Karunathilake is concerned that people with financial literacy will survive, while others will become poorer, even if they come from money.

“Savings is a collective effort, you have to tell your family to economise. Savings should be done with a goal. There’s no point in saving without purpose. That’s hoarding and we can’t take it with us when we leave.”

It’s not just saving, it’s also where or how you save. “Interest is not the only thing you must consider when saving money. You must think of the safety of your capital. Putting your hard-earned money in risky investments or chasing higher interest rates can be disastrous. Wherever you put your money, make sure it is safe; look at the ratings, and whether it is government approved. NSB is independently triple A rated for the past 19 years, we are 100% government guaranteed (no other local bank provides this assurance), your money and the interest is guaranteed by the government. We were deemed “The safest place for savings in Sri Lanka” by the Global Finance magazine.” NSB is also the only member of the World Savings Banks Institute from Sri Lanka.

When putting aside money, you have to consider many things. 1) Cost of opening an account, for example. NSB requires a minimum first deposit. In the case of school children, we provide the initial deposit. 2) Availability of banking channels: we have a vast network, including post offices. We have digital apps. By the end of this year, our core banking system will offer a fully computerised, real time service; an anywhere, anytime banking service with no branch/ATM visits necessary. 3) Interest rates; we have very competitive rates. We provide the benchmark. We may not be the highest rate payer because as the giant savings bank in the country we have a responsibility towards the economy. If we pay 20%, then the private sector will have to go beyond that. This would distort the economy. But even though we offer 2-3% lesser interest rates, people still come to us because of trust.”

“At NSB, we don’t believe in debt traps. Our people are very clever at earning or making money, but the problem is spending. As a government institution we must provide facilities for people to save.

“Right now we are focused on attracting foreign remittances. We have a competition that awards gold coins to winners. This is a big draw."

Mr Karunathilake says there is a misconception where people think; “There’s no money, expenses our high, we can’t save”. “But If you look at our seettu method, that’s kind of a saving. We have this financial discipline to fund our goals in our culture.”

“I’m not saying we have to scrimp and save and miss out on life; we don’t know what time we have to go. So we need to enjoy life. But we need a reasonable amount of savings.”

Sri Lanka is in the middle of a crisis. “Think of how much we have to spend on our health. This crisis won’t be over in a year or two, so we have to be very careful unlike in the past. Whether you are saving, you are earning or you are spending, you have to be careful. You cannot bring about prosperity if you don’t practice thrift.”

“We can have a happier life, a more prosperous life, a more content life if we practice this simple habit of saving. Anybody can save. We must incorporate thrift in every aspect of our life: double check every bill or transaction when you are shopping/ travelling. Charity is a different story, but we must not let people cheat us of our hard earned money.”