Editorial | Save and Invest
Let's not be too quick to dismiss the advice from Prime Minister Andrew Holness for Jamaicans to invest instead of stocking up on consumer items. It's advice well worth heeding.
While the ultimate goal of the Jamaica Labour Party's economic policy is to create more prosperous households, this will only happen over time, not immediately, is what Mr Holness appears to be hinting at in his speech to a stock market investment conference. This is a clear sign that the prime minister is embracing realism.
The golden lessons of thrift so instinctively taught to young Jamaicans by their parents and grandparents appears not to be so popular these days. However, there was a time when every child had a little piggy bank in which he or she would place pennies. Eventually, that child would start a savings account at a financial institution and later transfer that money out of the bank account and into investment options. Fortunately for some, that piggy bank has been replaced by compulsory pension funds.
There has been a perceptible shift in the Jamaican psyche away from that culture of savings to one of spending, as is common, particularly, in the developed world. A 2013 study by the Singapore-based Economy Watch found that Jamaica's gross national savings as a percentage of its gross domestic product (GDP) in that year was 15.9 per cent, compared with 24.7 per cent for Trinidad and Tobago and 47.1 per cent for China.
On the prime minister's advice to invest, many may counter with the question: "Where am I going to get money from to invest when I can barely make ends meet?" Yes, it's devilishly difficult to invest when one lives from pay cheque to pay cheque, is unemployed, or lives on remittances from relatives and friends.
BAD SPENDING CHOICES
Yet, as the prime minister has suggested, there are many who have invested thousands of dollars to emerge from a beauty salon with long tresses while batting fake eyelashes. Hence his exhortation to invest and not buy Brazilian hair.
Sadly, there are some who have helped Jamaicans make bad spending choices. For example, when a financial institution offers 100 per cent financing for a car purchase or for socialites to attend a weekend party, is that sound economics? How about super-low interest rates to finance college education or buy a house or expand a business? Housing affordability is an enduring challenge, especially for young professionals, so why doesn't someone offer them low interest rates?
Taking a cue from the prime minister, it is time for more people to start changing their way of life to incorporate new wealth-building habits. So a pay raise, a bonus, or monetary gift is something to invest rather than spend.
Jamaica will have a far brighter financial future if more prudent decisions are made by the population about how they spend their money and simply how to start saving, so they can get on the housing ladder and have something left over for retirement.