Retirement may be closer for some than for others but for all, the amount of money you need for retirement depends as a base on the amount of years you expect to live during retirement and the standard of living you desire during retirement. It should be noted that your sources of income during retirement need not only take the form of accumulated cash funds from which you receive monthly payments. For example, owning a property which you could rent out can be an income source during retirement.

The next step in determining how much money you need for retirement is determining the type of lifestyle you want to have when retired. If you want, for example, to have an income of $5000.00 per month when you retire and you expect to live for 20 years after you retire at age 60, you will need to have $1,200,000.00 (($5000 x 12 x 20) set aside at retirement age! As evident from the above example, the younger you start putting aside for your retirement or building your retirement nest egg the better off you will be! This figure may seem daunting but do not be discouraged! There are many measures which you can take to build your retirement fund if you are consistent and determined. For example you can invest in annuities, invest in stocks and shares or invest in real estate.

Investing in Annuities

You do not have to actually save 1.2 million dollars yourself – there is compound interest to help you. Regularly putting aside funds in an interest earning account in which interest is compounded can give you significant returns over the long term.

The tables below are examples of retirement annuities over different time periods calculated at various interest rates.

Retirement Savings Calculation 

Assuming 8% annual interest

Assuming 10% annual interest

Assuming 12% annual interest

The above example highlights the benefits of getting into a retirement plan at a younger age. If you wait for instance until you are 40 years old to start building your retirement nest egg, the amount of your fund at age 60 assuming a 10% interest rate would have been $687,300 assuming an annuity of $12,000 and having only 20 years to accumulate interest.

However, if you start retirement planning at age 30 or even 25 years you would have 10 or 15 additional years to build your nest egg. Using the same annuity and assumption about interest rates, you would have a higher valued fund or, you will find, you can decrease your annuity and maintain the same value of the fund because of a longer time to earn interest.

Investing in real estate has the potential for great long term return on investment. Take for example, the estimated median price of a three-bedroom house twenty years ago was $230,000.00. In 2006, the estimated median price of a three bedroom house was $1,065,000.00. This investment involves significant outlay and risk, however there is immense potential for positive return. In addition to wealth attributed to equity in the property, wealth can be increase by renting out the property which can provide additional income. Investing in real estate, although attractive, may not be a viable option for many. Your ability to invest in real estate will depend on your age, current income and assets and the current prices of land and property.

Investing in stocks and shares is an extremely high risk venture. Because of the risk return relationship however, (i.e. the higher the risk of the investment, the greater the potential for positive returns) this investment has great potential for high returns over the long term. Because of the high risk associated with direct investment in stocks and shares in addition to the low level of liquidity of this asset, it is not advisable for persons close to retirement age to use this method as a way to accumulate funds. The returns on this type of investment fluctuate and are usually most profitable over the long term.

Therefore low returns or even losses may occur in the short run from which a person with say only five years away from retirement, may not be able to fully recover. It is extremely important for individuals investing in stocks and shares to completely understand what they are venturing into. It is also very important for persons to monitor their investments and keep track of trends in the environment that may affect (either positively or negatively) their investment.

If you are closer to retirement age and after an evaluation of your current financial status, you recognize that you are short of funds for your retirement goals, here are some measures you can take in order to be better prepared.

• Do not stop working at retirement age: You may wish to continue working after you have retired, in order to retain your income source.
• Save more of your current income: You may set aside a greater proportion of your current income toward retirement savings.
• Be even more careful when choosing investment products: If you are close to retirement, be careful not to choose investments that are not safe. Carefully consider your age and the risk involved when choosing financial products.

If you are closer to retirement age and after an evaluation of your current financial status, you recognize that you are short of funds for your retirement goals, here are some measures you can take in order to be better prepared.

• Activities: Activities that you want to participate in during retirement will have an impact on how much you budget toward your retirement fund. For instance if you want to travel, you would have to consider the cost of that expense when saving toward retirement.
• Emergencies: You should have funds set aside for emergencies, for example, insurance on your income.
• The Rate of Inflation: Another consideration when saving for retirement is the rate of inflation as this erodes the value of money over time. Diversifying your investments among cash and non-cash assets which appreciate in value is one way to help safeguard against inflation eroding your retirement nest egg. You must carefully consider the return on your investments when planning for retirement.

Cost Effective Home Maintainance. You have finally bought your home and now the real work begins. How can you maintain the home that you have waited so long for? The upkeep of your home should be undertaken on a continuous basis. This is to prevent the need for major repairs which would require spending a large sum of money. These simple guidelines can help you maintain your property and minimize unnecessary expenses. 

The best way to save money on repair costs to your home is to spend small amounts to upkeep it on a regular basis. You should allocate a small portion of your income, on a monthly basis, towards performing minor repairs. A household budget is an ideal way to track household expenses. When preparing the budget, cleaning and preventative maintenance should be taken into account.

Regular home maintenance could include:

• Repairing leaks to a roof
• Changing corroded galvanize sheets
• Replacing broken window panes

This will cost far less than if the problems are ignored and they become progressively worse.

If your property is neglected, it would become dilapidated over time and in turn its value would diminish considerably. The continuous maintenance of your property should include the following:

Cleaning on a regular basis


1. Preventative maintenance
2. Repairs and improvements.

Regular Cleaning
Your home is your castle and as such you should ensure that it is cleaned thoroughly on a weekly basis. That is one of the best ways to ensure that your home remains a safe and healthy environment. When your home is well kept, both inside and outside, it makes it easier to identify the areas that need attention. For instance, you may notice a stained tile, a clogged drain, or even a hinge on the cupboard door that needs attention. All these can be easily repaired.

Preventative Maintenance

Preventative maintenance is geared towards avoiding the need for costly major repair work to be done on your home. This includes checking that there are no leaks in the roof, the galvanize is not corroded, the plumbing fixtures are in good working condition, there are no cracks on the walls, appliances are in good working condition, drains are not clogged. Should attention be needed in these or any other areas in the home, the problem should be attended to immediately.

Spending money on regular and routine preventative maintenance is the best way to minimize costs while maintaining the value, safety and comfort in your home.

Repairs and Improvements

As a result of your routine preventative maintenance exercises, you will identify areas needing repair at an early stage i.e. before they become a hazard. You therefore have time to schedule those repairs.
Home improvements can be major works and may require obtaining a loan from a financial institution. Whatever work you decide to accomplish, you must ensure that you get an estimate from a reliable individual or firm. You may wish to obtain more than one estimate and compare them. After selecting a contractor, you may then have to approach a financial institution to obtain financing for the project.

When approaching the financial institution you must bear in mind that your monthly budgetary expenses (including the repayment of the loan to be granted for renovation) should not exceed 35 per cent of your gross monthly income.

IV. Mother Nature and Your Home

After severe weather, such as, high winds, heavy rains, earthquakes, etc. you should:-
Check the roof of your home;
Check all the internal and external walls immediately after the severe weather and check again after five to ten days;
Check the fence around your property;
Take photographs of any damage to your property, if possible;
Report all damages to your insurance company and other relevant authorities;
Temporarily patch or fix the damage to maintain a secure environment.

V. Tips for Homeowners

1. Every home has repairs that should be addressed on an annual basis.
2. Always have money budgeted specifically for repair work to be completed on your home.
3. To avoid major repairs, spend some time on preventative maintenance.
4. Maintaining a beautiful, healthy, safe and comfortable environment requires regular cleaning of your home and surroundings.
5. Constant maintenance of your property will reduce the need for unplanned repairs.
6. When thinking about renovating your house, plan on saving money on a monthly basis, towards the renovation so that you are well prepared.

For more information on cost effective home maintenance and other related articles, visit the National Financial Literacy Programme website at.

It is indeed heart breaking to be a parent of a child with immense potential and capable of doing much more with enhanced knowledge and skills but unable to further his/her education/skills because of financial constraints.
The best advice which can be conveyed regarding savings for your children’s education is start early! The sooner you begin, the less money you will have to put aside each month/year to save a specific amount or the more money you will have if you put aside the same amount of money each month/year.

Depending on your child’s (children’s) current age (s), you may be able to get an idea of what he/she (they) want (s) to do and then get an idea of the associated cost. Children though often change their mind or life direction from their initial childhood dreams to practical reality, depending on their abilities. Therefore, it is possible that what you initially plan for may have to change. Nevertheless, some sort of idea may serve as a benchmark/guide as to how much funds need to be accumulated. If your child (children) is (are) too young to give you an idea for instance, if the child is anywhere between baby and infant, you may choose to regularly put aside an appropriate amount which you can afford, in a fund which will generate positive returns.

When deciding on where to put your funds, there are certain issues you will consider. Firstly, there is the issue of whether your savings goals is short-term, medium-term or long-term. This will depend on the age of the child. The younger the child, the longer the time you may hold the investment. The longer the term, the greater the potential for higher returns.

You will also need to consider the return, risk and liquidity of the financial instruments within which you plan to invest for your children’s future. The greater the risk, the greater the potential for better returns. Also, it is common for higher interest instruments to be less liquid than lower interest instruments. If you have a long time till your child would be in need of the education fund, you may invest in longer term instruments with greater risk but greater expected return. Although there may be greater risks involved and more fluctuations in the fund, because of the long term of the investment, the fund is likely to have an overall positive return over the long term.

If you have the funds, you can diversify your child’s education fund. You may diversify among short, medium and long term investment instruments with more funds being placed into longer term instruments in the early stage of the investment and then re-allocated in the latter stage of the investment so that more of the fund will be in safer, shorter term instruments.

Some examples of instruments within which funds can be saved for your children include:

Longer term investment instruments 

• Tax incentive savings plans
• Equity-based mutual funds
• Term insurance plans

Shorter term investment instruments 

• Money market funds
• Fixed deposit accounts
• Certificates of Deposit
• Treasury Bills

Helpful Hint

You may wish to take advantage of savings plans that allow you to reduce you taxable income and benefit from tax savings now and a fund for your children in the future.

Getting Married? Control How much You Spend on your Wedding. Your boyfriend has just popped the big question! You are indeed very excited. YOU ARE GETTING MARRIED! Arranging a wedding is a huge task so you have to plan for this event.

With sufficient time, you can shop around, compare prices and find the best bargains. The first thing you must do is decide on the total amount of money you both intend to allocate on your wedding. You must set a limit. Planning a wedding can be quite a challenge especially if you are on a small or tight budget.

Couples today spend huge amounts of money in order to achieve their dream wedding. An extravagant wedding does not ensure a successful marriage. It is important that you guard against entering your new life together with a huge debt from your wedding. The money saved from spending on an elaborate wedding can go towards the purchase of your new home. Therefore it would be wise to open a joint account, (where both for you and your fiancé’s signatures are needed for withdrawals), for the purpose of saving on a monthly basis towards your wedding. You should avoid the use of your credit cards and applying to a financial institution for a loan because you would only put yourself in debt, which you should try to avoid.

After the initial excitement, wears off, you realize the magnitude of the task of planning for your wedding. You should therefore discuss the following with your fiancé:

• Budget
• Venue for the reception
• The guest list
• Catering and menu
• Wedding wear
• Church/Outdoor Ceremony
• Bridal Party
• Flowers
• Cakes
• Rings
• Honeymoon, etc.

It is important that you and your fiancé discuss the various details of your impending wedding and decide how much you intend to spend. Today most couples save jointly towards this special occasion and continue to save in order to reach their goal of purchasing their home.

As a general rule, allocate 50% of your budget to the reception (location, food, {including the cakes}, drinks, decorations, music) then 10% each to rings, attire (bridal gown, tuxedos), photography/taping, and honeymoon. The remaining 10% can be used for invitations and other miscellaneous items.

A budget is a great planning tool for the wedding. Write down your budget, as that would help you to stay within your target when you are shopping. Once you and your fiancé have agreed on the budget you should then prepare a “To Do” list with set timelines and persons assigned to get things done. This budget is going to become very familiar to you because you would have to refer to it frequently.

A meeting should also be arranged with both sets of your parents in order to invite them to form part of the planning process. This occasion is most times, a joy for parents and they would be delighted to be of assistance. They are usually willing to offer financial assistance as well. To avoid duplication and confusion in the planning phases it would be wise to assign them specific duties.

There are many popular venues for wedding receptions and they usually offer an all-inclusive package, for instance catering services, bar, table, chairs, linen, cutlery and decorations. Usually 50% of the budget should be allocated for the reception (this includes of food, bar, decorations, disc jockey) if it to be held at such a venue. The least expensive venue is likely to be at someone’s home.

When deciding on the venue you must bear in mind what kind of wedding you would like. For instance, is it a formal wedding, an informal wedding, a morning wedding, etc. Whatever your decision, refer to the budget when shopping and ensure that you stay within budget as far as is practicable.

When making your booking you must bear in mind that a deposit is required in advance, to hold the reception hall for the day requested. If you are working on a tight budget, or you may prefer to save your money in order to start your life together, then there are alternative venues which you can choose from. Alternative venues enable persons to save a lot of money. You would have more control of the planning since you would choose the caterers, decorators, etc.

Now that you have finished preparing your budget you and your fiancé must decide on the guest list together. This is usually the most contentious item in the planning. Will you invite only immediate family or will you include first and second cousins? Will the list include persons from your respective workplaces? How many of your friends will be included?

Whatever the decisions, both you and your fiancé must agree on how many and who would be invited to the wedding. Know that you cannot invite everyone you know or who knows you. Also your parents should be given the option to include some of their friends on the guest list.

Most established reception venues would include catering services as part of their cost. However if the wedding reception will take place where catering services are not included, then these arrangements will have to be made. It is always better and often cheaper to source your own caterer. You get to liaise with the caterer directly and decide on the menu and tailor the food and drink services to your needs.

Traditional wedding ceremonies are held in a Church. After the ceremony, the guests then proceed to the reception venue. If an outdoor wedding is planned then the ceremony may be held in the open air. Having an outdoor ceremony requires tents (in case of rain), chairs for the guests, altar, musicians, etc.

Persons may choose to go with the traditional wedding cakes. That is a 3- tiered bridal cake, with lots of roses and flowers, a smaller cake for the groom and two (2) side cakes. This traditional style of cake is proving to be very expensive and persons are more and more deciding to go with smaller cakes. Whatever the decision, remember that the cake you choose must fall within the allocated budget figure. About 3 per cent of budget figure should go towards the cake.

Your wedding flowers are in every photograph you take and these pictures usually last a lifetime. The flowers bring life to the atmosphere and it is one of the things that your guests will notice. Therefore the flowers for your bouquet, the bouquets for the bridal party, the corsages and the flowers for the Church and reception venue, must be truly reflective of your style. They must all be tastefully done. Flowers can be expensive therefore you must have in mind exactly what you would like to achieve with your flowers. If possible take some pictures to your florist and work closely with her to achieve your goal. More and more people are using a mix of real (to get the smell) and plastic flowers for decorating the reception venue.

About 15% of the budget should be allocated to this exercise.

When choosing your bridal party it may be wise to choose close family members and close friends. You and your fiancé should agree on the size of the bridal party and on the persons who should form the party. Usually the bridesmaids and groomsmen pay for their own dress and accessories.

The groom’s suit and the bride’s gown can be very expensive. There are many bridal expos throughout the country during the year where gowns and suits can be purchased at a cheaper price than they are on the market.
Alternatively you may want your Wedding clothes to be sewn by your seamstress or tailor. Whatever your decision, bear in mind that the clothes should compliment you and it should be wonderfully made. After all, this is your day.
Brides! Remember too that tradition dictates that you wear:
Something old, something new, something borrowed, something blue.

The honeymoon should also be factored into the budget. This period will give the newly wed time to relax together after their big day and for them to reflect on their new life together. For some, this is an important part of the marriage process. Whether you go on a honeymoon and where you go, depend on your budget.

These are some other details to be discussed for instance:

• Choosing the rings
• nvitations
Chief Brides
• Maid
Best man
• Master of ceremonies
• Gifts register
• Limousine for bride and groom, etc.

You should be very practical when choosing your rings. Consider the option of having a jeweler transform an old ring into a wedding ring.

There should be a list of all the things which you should go through in detail and plan accordingly.

Planning a wedding is a very enjoyable yet time consuming exercise. You and your fiancé must ensure that you save towards this event. You should make a budget and follow it closely. Also a plan and time-line to get things done is important. Once you work closely with your budget and follow your plan, your event will come off beautifully.

Starting a small or micro business (SME) is a unique experience as many of us dream of owning our own business. Before making any strides to make this dream into reality, it is imperative to pose a few specific questions to oneself.
The first question would be: Do you have the Entrepreneurial Spirit?
Succeeding as an entrepreneur is all about attitude!

As a person seeking to be in business on your own, you must possess or acquire an entrepreneurial spirit which conditions your thoughts, thereby providing you with the appropriate mindset needed success. It keeps you persistent and committed to your business venture. Before venturing into business, you should ask yourself the following questions:

1. Do I have the knowledge about the business I want to get into?
2. Do I have self-confidence?
3. Am I persistent?
4. Do I have an inner drive to succeed?
5. Am I creative?
6. Am I a responsible and reliable individual?
7. Am I organized?
8. Am I willing to take risks and accept change?
9. Do I communicate well?
10. Am I a competitive person?
11. Am I open to constructive criticism and advice?

If you answered ‘YES’ to all of the questions above, then you are ready to be a successful entrepreneur!
However, if you answered ‘NO’ to any of the questions above, these are some weaknesses that you will have to overcome before you can start your own business.

Note

• Being a successful entrepreneur requires you to be able to interact and communicate effectively with others as you would need to develop working relationships with your suppliers and customer base in order to keep going!
• If you want to get into business only for the money you may become disillusioned.
• If you want to be successful, you must provide quality products and services to your customers.

As an entrepreneur, you need to identify your business opportunities, evaluate your capabilities and select an activity that is most suitable to your characteristics. Once you have made the decision you must prepare a business plan which is very important if you have to seek financing from a financial institution. Institutions will want to read your plan before they provide any funding that you may need to start the business.

Before embarking on any business venture, you must understand it. You need to become familiar with the business environment i.e. all the critical factors that may affect the operation of your business.
These include knowing your:

• Customers
• Competitors
• Suppliers
• Industry

Furthermore, you must appreciate that there are risks associated with the establishment of any new business. Therefore, before starting your new business, you should conduct research and be able to answer the following questions:

1. Is there a market for my product or service?
2. Are the raw materials, tools, equipment and other resources available?
3. Is the quality of my product or service such that it can compete effectively with the already existing products on the market?
4. Where is an appropriate location for my business? E.g. home based or rental.
5. What production processes do I have to use?
6. What are the production costs?
7. Can an initial lower price be charged for my product or service in order to penetrate the market?Who will undertake leadership and manage the resources?

Your vision statement is your dream. It should state where you see yourself and your business in the future.

Your mission statement describes the purpose of your business in one or two sentences. It should include information on your product or service and explain how you intend to please your customers. Your mission statement should be a reflection of your enthusiasm as an entrepreneur and should be short and to the point.

In this fast-paced world, financial success and accomplishing one’s goals require a strategy or plan.
Most people develop partial plans – For instance, we develop financial plans to finance university education, to buy a car, to go on vacation, to buy a house and even to play mas. These plans will differ in the level of detail depending on the nature of our goal.

Successful people develop an overall plan spanning three to five years – this is the realm of personal financial planning.

A Personal Financial Plan ensures that you make the most appropriate use of your financial resources and enhances your chances of accomplishing the goals that you have set.

A Personal Financial Plan seeks to chart a financial course over your life cycle. Typically, it could involve planning for tertiary education, changes in family circumstances through to retirement.

One of the most efficient and effective personal financial planning tools is a budget. A budget allows you to implement your personal financial plan and to determine exactly how and on what you intend to spend your money. When preparing a budget, you ought to clearly establish a goal or set of goals. One important goal is determining the amount of money that you would like to put aside for a rainy day.

Personal financial planning compels you to answer some critical questions such as:

• How much can I start saving now?
• How much debt do I have now?
• When do I want to retire?
• What type of lifestyle would I wish to have when I retire?
• When do I want to own my own home?
• How much do I want to put aside for my children’s education?

These questions may vary depending on your particular situation. Regardless of the situation however, it is necessary that certain steps be taken if Personal Financial Planning is to be successful. The key steps in successful financial planning involve:

• Gather all of your financial information: Knowing your financial position provides a holistic view which can better equip you to define a realistic strategy for your personal financial growth. Categorizing your information into income, expenses, assets and liabilities and making a comprehensive list of your miscellaneous expenses will best guide your financial planning process.
• Plan for three to five years at a time. Formulating a specific or detailed medium-term strategy affords you the ability to better realize your financial goals. This should be done in tandem with making a list of all the goals that you want to accomplish and putting time frames, as well as dollar values on each goal as far as possible.
• Review your plan periodically. As time passes, your personal financial plan should be monitored in order to determine if there is need for adjustments or reassessments to that originally outlined. You should review your information regularly to gauge your progress.
• Saving is integral to successful personal financial planning. Identifying the path that you want to follow is only one step in realizing your financial goals. Saving towards accomplishing your goals is the other.
• Create an Emergency Fund. Having a fund for emergencies provides a “financial cushion”. Should an unforeseen event occur, the emergency fund can be accessed therefore protecting the savings aligned to your goals.
• Invest wisely. Consider various financial instruments Seek advice from a registered financial service provider. In the process of formulating a financial plan, and considering investing, it is critical for you to weight the amount of risk that you can afford to take- financially and psychologically. Investment instruments can range from being low to high in risk. Those high in risk, for example, are usually accompanied by higher returns, but greater chances of failure.
• Do not put all of your eggs in one basket. Diversification is recommended for successful financial planning. It is wise to stay on the look out for opportunities that vary in risk, but in keeping with your risk profile (core attitude towards risk).
• Consider real estate as an option. Land is an asset that generally appreciates in value. In formulating a financial plan, it is prudent to maintain the acquisition of real estate as an instrument to strive towards.

Remember, in order to achieve financial success, and convert your dreams into reality, a good financial plan is needed.

It is useful for you to develop the habit of making a budget.
A budget refers to a list of income (money you get) and planned expenses (money you hope to spend). Budgets can be made for a person, a family, a business, a government or a country. Each month you may receive a fixed or regular income which means that you have a fair idea of the amount of money you will get. In your case this may be your pocket change or allowance. In your parent’s case this may be a salary. Your regular income should be used to meet your regular expenses such as groceries and electricity.

You should also set aside money for a regular savings plan from your regular income. Sometimes you receive unexpected forms of income e.g. birthday gifts, Christmas gifts, prizes or rewards for doing well at school. In addition to your regular savings, you should try to save as much of your unexpected income as possible. It is good to save for things we want. Sometimes we may need to make sacrifices to increase our savings and meet our wants or needs.

If you decide to give up the purchase of say one soft drink a day, you can set aside this money towards an item that you wish to purchase. In a personal or family budget, all sources of income e.g. salary, cash, gifts from grandparents, are identified. After this, expenses e.g. expenditure on groceries, utility bills, new school uniform, books, rent, are planned. The idea is to live within ones means or to make ends meet. To do this you must match your income with your expenditure. It is important that you put aside some of your income for savings even before you plan what you are to spend. Our savings is listed as an expense because it is one way we use our income.

Today having a formal education is more important than ever and young people are investing in a good education to secure a good job for themselves. They recognise that there is much competition in the job market and that they must have the right tools to take part in that competition. You cannot win a raffle if you don’t have a ticket. Whether you want to be a banker, teacher, cook or plumber, you should undergo some form of formal training. This costs money. You can meet you education needs using savings, a loan or some type of government grant. Most countries offer student loans at a low rate of interest and the student only begins repaying the loan when he or she starts working.

The government also offers grants to help people further their education. Depending on the national budget, in some years, the government may repay you all of the money you use to fund your education or sometimes only a proportion, say 50%. You must check to see what type of assistance the government is offering to help you further your education and make the most of it.

Insurance is protection against unwelcome/unexpected events. You can take out an insurance policy to protect against damages to your home, your car and even your health. If you do have an accident or become so ill that you need costly medical care, you can make a claim on your policy and the insurance company would pay a given amount depending on what was agreed in your policy. Sometimes you may not need to make a claim and some people feel that they have wasted their money. What you need to remember is that having a policy provides you with the comfort of knowing you have some protection against losses. Imagine trying to rebuild a home that was destroyed by fire on your savings only. An insurance policy provides funding to help meet this need.

Some parents take out insurance policies for their children while they are still quite young. Usually, an insurance policy for a child is cheaper than that of an adult. One useful insurance policy for children is education insurance. It is somewhat like a savings plan and is useful as the child can only have access to the money when he or she enters say university or college, The money placed in the policy therefore grows as the child grows.

One of the most important financial decisions you will have to make is whether to live with family for the rest of your life, rent, build or purchase a home. Renting your own home brings you some independence but you keep paying money for something that will never be your own.

Building or purchasing a home is one of the single biggest expenditures you may make in our life. Most people cannot do so from their own savings. They need to take a loan. These loans are called mortgages.
Mortgages are loans from financial institutions that help people to buy, and eventually to own their own property, whether this is land, an apartment or a house. You might also use a mortgage to pay for improvements to your home. The main difference between a mortgage and most other types of borrowing is that it is ‘secured’ against your home.

Your house is the collateral. This means if you fail to keep up the repayments, the lender can sell your home to recover the money that is owed. But if you do keep up your payments, the house will be completely yours when the mortgage is repaid. You can also take a mortgage loan with another person such as a parent, sibling or partner.

Before a mortgage can be secured you must make a down payment. Since mortgages can be your single biggest expenditure and investment, it is important to start saving for your down payment from early.
Remember, owning a home is a large investment. It is very important to keep your home insured. 

But I’m still at school! I’m young! Why do we need to talk about pensions? It is important to consider who will take care of you when you get older. Some people think that their children or family should do so. Others think they can live on money provided by the government. However, some people make their own pension plans because they recognise the importance of ensuring a good quality of life even in their old age.

A Pension is money or income that is paid out after someone retires from his job. With most pension schemes, you contribute a proportion of your income to the pension fund each month. Some people think of this as a ‘locked box’ form of savings because you cannot spend any money in the fund until you have reached a minimum age. In Trinidad and Tobago, the government may pay a pension from age 65. Because the government pension may be much less than what you were accustomed to earning, some people begin putting money into a pension fund from the time they start working.

This provides some additional funds in your old age. Pensions can be hard to get to grips with. This is partly because, for many, old age seems a long way off, so setting up a pension may not be seen as a high priority. However, because people are living longer, they can now live for fifteen, twenty or even more years than this after they retire from their jobs. If young people continue to ignore planning for this stage, they may face hardship in their old age.

Some workplaces have a compulsory pension scheme. You can also join a private pension scheme that is offered by insurance companies and other financial institutions. Remember while old age seems a long way off, it is important to start contributing to a pension scheme from young.

Some Useful Information about Pensions

State pension: A pension provided by the Government. In order to receive the state pension you must pay National Insurance Contributions – which is a form of tax on earnings – payable during your working life. A person must normally pay National Insurance Contributions for a minimum number of payments/ contributions to qualify for a full basic government pension.

Occupational pensions: A pension linked to a job or profession. Many employers offer a pension as part of your job. In most cases you are asked to pay some money (called a ‘contribution’) which is taken from your salary or wage. The employer must also contribute to the scheme. In some cases an occupational pension is called ‘non-contributory’, which means that your employer pays all the contributions.

Personal pension plan: This is a pension an individual can take out with an insurance company, bank, building society or investment organisation. It is suitable for those who do not have access to a work scheme or who do not wish to join their occupational scheme. A personal pension plan can also be used to top-up the pension from an occupational scheme. 

• Use your common sense: If you get into financial difficulties, the worst thing you can do is pretend the problem will go away. It won’t and you can end up in court.
• Trust no one: Especially with your PIN (Personal Identification Number). If someone knows it and he or she gets hold of your card they can collect your money from an ATM machine. They may also tell other people what the number is. If you have to write it down, try to disguise the number and/or keep it in a separate place to your bank / credit card.
• Save something: Build up an emergency fund so you can cope financially in a crisis without being forced to borrow. Saving is also a good discipline regardless of how little you can afford. Don’t be ashamed to start small. Every dollar counts! Get a savings account with a decent rate of interest.
• Get a good deal: Shop around for credit or loans the way you shop for anything else. Look around for the best credit deals. Avoid getting into too much debt!
• Think ahead: You may think pensions are just for old aged people, but the best time to start paying into a pension scheme is around 25, or even earlier. You can have a pension plan from any age.
• Get help: If you’re worried about your finances talk to someone who can help.
• Take action: Personal Finance needs a degree of planning. Use a budget planner. You can also do a lot more to get your money working harder, starting with where you choose to put it.
• REMEMBER:
  Start a committed saving plan today
  Read the fine prints on all your contracts
  The cost of loans can vary according to the type of loan and the lender
  Credit cards are easy to use but it is important to pay off all or as much as you can on a monthly basis.

As a teenager it is very important to understand some key concepts from the financial world that surrounds you. Understanding them basically helps you make better financial decisions.

Developing good money management habits such as saving and budgeting in your adolescent years, prepares you for the future. As an adolescent, you may be thinking that these habits do not have to be considered right now because your parents or guardians take care of all your financial needs. But if you delay focusing on them, it can cost you having a great financial start in the near future, because saving consistently as early as possible, can add up over time and help achieve your short and long-term goals.

Remember….You are not too young to be a financially capable person!

Saving and budgeting can be considered the most essential financial tools required for financial freedom and success. They are as important as a foundation is to a house, an engine to a car or pillars to a building!

So what exactly is saving? There are many definitions available; however, it simply refers to “the portion of income not spent on current expenditures” . In other words, “saving means not spending your money straight away, but putting it away so you can spend it later”.

The main reasons for savings are:

• To develop a positive habit of saving
• To be prepared for major life events such as furthering your education (e.g. tuition expenses, books etc.)
• To cope with emergencies
• To assist with post-secondary school expenses such as clothing, food and shelter as you may be job hunting
• To instill a sense of independence in yourself as you transition into a young adult
• To improve your credit rating so that you can access a loan such as a mortgage to help you in the future

Saving your money at home is good, but it isn’t safe and most importantly it does not help your money grow. Therefore, it is more prudent to save your funds in a secure place such as a financial institution of your choice, so that interest can be earned and it is not under the threat of loss due to theft, natural disaster and/or misplacement. Utilization of a financial institution reduces the chance of losses, theft or even the temptation to spend on the latest gadget or entertainment.

Given that you may not be of legal age to open an account on your own, there are special provisions in place which allow your parent/guardian to do so on your behalf.

Remember, piggy banks and mattresses may be a good start to savings, but a smart saver knows the benefits of opening an account! If you haven’t already done so, what are you waiting on?

Believe me it’s exciting to watch your money grow. Get hooked on saving today!

There are a number of different financial institutions to choose from. The term Financial institution is used for banks, trust companies, credit unions and other investment companies that deal secure, invest and lend money.

The following are some debt reduction tips:

Commercial Bank (Bank)

Banks offer a wide range of services such as:
– Savings accounts
– Loans to individuals and businesses
– Issue Debit, ATM and credit cards
– Banks have a license to take your money

Financial Tip: In Trinidad and Tobago your savings (savings accounts) with a bank are insured up to $125,000, this means that if the Bank experiences financial difficulty, your money is safe.

Credit Unions

Credit unions are membership organisations that are formed by people living in a particular community; employees of a business or members of a religious or other organisation. To become a member, you must purchase shares and open an account; this is done by making deposits into the credit union. As soon as you deposit funds into a credit union account, you become a member and part-owner. A credit union is called a cooperative financial institution because its members are the owners of the credit union and profits are shared amongst them. Only members of a credit union can deposit or withdraw money.

A credit union operates by taking money from its members, on one hand, and lending to its members on the other. The credit union uses your shares as collateral for the loan. Once the credit union makes a profit, it is shared among all members. The share of the profits that a member receives is called a dividend. Profits are calculated after the credit union deducts operating expenses such as salaries, rent and maintenance bills.

Mutual Funds

A mutual fund is a form of collective investment because it pools money from various persons and invests it in various financial instruments. Persons who purchase mutual funds are called investors as they purchase units in the fund.

The funds are managed by a fund manager and its returns are shared among the fund holders as dividends after operating expenses are deducted. Mutual funds pay higher interest than deposits because there is some chance or risk that the money invested may make a loss. The possibility of getting a higher return or growth on their money encourages people to invest.

The Stock Market or Stock Exchange

The Stock Exchange provides a place for people to buy and sell shares in companies that are listed on the register. When you purchase a share in the company you become a part owner. That means you receive money (dividends) if the company makes profits. There is the risk however, that if the company makes a loss, no dividend will be paid. You can also sell your shares on the stock exchange.

The price of your shares can go up or down depending on the profitability of the company. If the price of your share is higher than what you paid for it you have made a capital gain. Stock exchanges operate under strict rules, regulations and guidelines.

Bonds

A bond is simply a loan provided to the government or a private company to help them raise money or capital to finance projects. When the government or a company issues a bond, it promises to pay you a specified amount of interest for a specified length of time and to repay you the full amount of the loan when the bond matures or comes to an end. Bonds generally pay higher rates of interest than savings because they may be held by the government for as long as 5, 10 or 20 years.

In general, the longer the period for which the bond is kept the higher the rate of interest paid. Investing in a bond is a good way of setting aside money for future use.

It is not as easily accessible as savings and earns a higher rate of interest. Government bonds are risk free which means that you should always get your money back at the end of the loan. Corporate or business bonds carry some risk. The company may be unable to repay the loan if it does not do well.

Saving: Saving is simply putting aside money which will not be spent. As previously mentioned, occasionally, persons save to have available funds to meet emergency expenses or towards a specific goal. Most financial institutions have savings account plans where your money will earn interest and be safe. When you place money in a financial institution, you usually expect to have the amount you have not used available for use and to earn some interest. Because there is little or no risk associated with saving money, you earn lower returns than if you had invested the money.

Investing: Investing is putting your money to use so that it can earn higher interest. Generally, money for investment purposes is put away for longer periods of time than savings. You usually hope to make a greater return on your money but the risks are also greater. When you take more risk or invest for a longer period of time you are paid more interest. Purchases of mutual funds, shares and real estate or housing are all forms of investment. The value of an investment may increase, decrease or stay the same. If the value decreases you may not get back the full capital (money) that you put into the investment.

Capital: The amount of money you have to save or invest.

Risk: Risk is another name for chance or uncertainty. One type of risk you face is the chance that the value of your investment may decline. The more uncertainty there is about the investment, the higher the risk and the higher the interest that will be paid. An investment in a new company normally carries a higher interest because there is no proof of how well this company will perform, so the investment is more risky. Investing for longer periods also carries higher interest because it is more difficult to predict events further into the future.

Return: The amount of money you get back on your capital. A general rule is that you get a higher rate on more risky investments.