Boost Savings To Ease Liquidity Crisis

Even when the developed countries like the United States are in heavy debt, it may not be easy for smaller economies to be out of debt. It has been revealed that every Nepali citizen has a debt worth Rs. 63,000. It clearly indicates that Nepal is deep in loans as the nation holds public debt worth over Rs. 2.221 trillion. Until one year ago, the country’s total public debt remained Rs 2.012 trillion. Thus, the trend is rising. Today, money is more than a medium of exchange. It is a symbol of power, security, and identity along with status. It acts as an essential part of our life and plays a significant role in shaping our behaviour which also works around to influence the decision of an individual. Money also has a direct connection with our emotions as it can be a source of pride, security, happiness or stress, anxiety, and shame for others.

Budget management 

Debt, on the other hand, comes out as an amazing facility that can be a boon or a curse for a nation, business, or an individual as a whole. It can significantly cause stress to anyone's finances and hence the best way to get rid of this stress is nothing but proper management of such debts. Be it by prioritising the debts, or paying more than the minimum, it is important to pay off the debts. Knowing one's limit is equally important because it is not just the credit limit that would set one's limit. Investing in oneself is a crucial step for achieving financial success and that could be through making a smart investment base where there would be personal growth and development figured out too. When people tend to buy what they can't afford, debt automatically surrounds them

Many areas for investment

When there are so many areas to invest or spend, savings seem to be one major challenge. After fulfilling the basic needs, there then appears another need that people tend to be attracted to luxury-based needs. Even after fulfilling those needs, there are other investment areas where people tend to invest. A salaried person, no matter how big his/her salary is, after buying all the groceries, s/he plans to spend on some fancy resort or club. S/he plans to buy updated gadgets and also intends to invest in some stock. So, there would not be any portion left for saving. The same salaried person, while in some remote area, won't have any spaces to spend, being forced to go for saving. 

Nepal is still having a liquidity crisis, and that is being felt by everyone at this time. Tempo driver riding to New Road claims that passenger number has drastically dropped down, and wholesalers in the same area claim that no retailers are willing to purchase their products. It shows that people don't have money to spend at this time. The situation is the outcome of people's habit of 'not saving'. Bloomberg's economic article explains that two in three American's won’t be able to cover $400 in emergency funds. This means that 35 per cent of American's can’t meet any sort of unexpected expense of $400 or more through cash and have to rely just on credit. 

But, when this situation is in Nepal, it can be considered the worst and the people have no option left but to beg or get borrow money in unreasonably high interest rates from loans sharks. Having clearly defined financial goals and making an appropriate budgeting plan is a key way that would help in allocating funds for saving. It is important that individuals need to cut off their unnecessary expenses coming out of challenges brought by companies to promote saving habits. 

There are automatic saving institutions in Nepal like Social Security Fund (SSF), Provident Fund (PF), and Citizens Investment Trust (CIT) in existence, which help in promoting saving habits among people, to a large extent. Nepalis have a general habit of spending right in the day when their salary gets credited into their account. The inflation figure is more than it is presented officially because the level of income becomes limited and expenses turn out to be much higher, ultimately restricting saving behaviour. So, when these basic needs themselves turn out to be expensive, saving becomes out of the subject there. 

Impulse spending

Generally, when income would rise, the saving amount had to increase automatically. But with increments in income, people tend to improve their lifestyle. Individuals would rather be tempted to increase their spending pattern - a bike rider would seek a new car, a car rider would seek a bigger car and the list goes on, because of which saving again becomes out to be something unimportant. There is also a habit of impulse spending among people and they would not have self-control which acts as a major hindrance in saving behaviour. 

There is a limitation in financial education too acting as the next obstacle to creating elements for saving. It is important to understand that developing any form of habit would take time and effort. Liquidity will be coming to ease and credit would be further easy. Not unless we, as individuals work out for this habit, we would be independent. When we can develop a culture and practice saving, it may have positive consequences on the overall economy.

(Regmi is Deputy Manager at Rastriya Banijya Bank Limited.)