Financial literacy, bonuses and year-end plans

“It is always easier to teach a young mind or a desperate soul”

Having worked in the financial services sector for over 25 years, we can confirm this to be true. There are 2 types of learners in our experience.

Those who genuinely want to understand how things work and approach learning with the curiosity of a young mind.

They will ask questions in often new and interesting ways that sometimes challenge the traditional wisdom and logic. Our long-held beliefs are constantly being put to the test by their curiosity. Then there are those who simply want to know the one “trick or secret” and are not interested in anything else.

They will often ask questions of a procedural nature or from a sense of obligation. They don’t show interest in understanding beyond what is required to get the scoop that will make them instantly rich.

Regardless of the investor type, financial services firms are required to ensure that their clients understand the products and services they are accessing and that this is documented.

This requirement leads to some interesting outcomes that our friends in the legal field could envy.

Wordy terms and conditions, complex fine print and lengthy disclaimers, most of which do little to educate on the products and services being contracted.

There are client service officers in some of our financial institutions who will take you through the ins and outs of the firm’s terms and conditions but fail to explain aspects of the firm’s core products and services.

Perhaps, being insiders, we expect more in-depth interactions, which might not be necessary given the types and levels of business being contracted. So, as a matter of habit, we always request brochures and flyers that we add to our bedtime reading library.

Some firms are pretty good at using corporate literature to both educate their clients whilst describing their products and services to meet the regulatory requirements. However, the majority of firms do very little educating, instead preferring to use their corporate literature to extend their sales pitch or focus on aspects of self marketing.

As we approach the end of the year and start to plan your financial and investment strategies for the coming year, it is essential to prioritise financial literacy as a key component of your strategies in the new year.

For investors, the more knowledge you acquire, the better your instincts will become towards identifying and mitigating risks.

For financial services firms, the more you do to educate your clients, the more fruitful and profitable your engagements will become.

The collective sophistication of our interactions needs to improve for us to be able to leverage our financial resources and intellectual capital.

We need to better ourselves and the country as we start to face new challenges from emerging threats.

The benefits of our entry into the Africa Continental Free Trade Area, as well as our possible readmission into the Commonwealth, are examples of challenges that require us to have very sound financial footing.

We also need to start developing financial literature to empower our children from early childhood to be financially literate.

Entrepreneurship and innovation need to be cultivated and supported from as early as possible. Strong financial grounding at early ages produces strong financial outcomes that reduce instances of financial waste or loss.

Speaking of financial loss

Bonus season is upon us and has become tradition, stories of people losing their hard earned bonuses will start to circulate soon.

To avoid becoming victims and possibly turn the tide and actually grow household savings and investments, there is a need to encourage each other to plan ahead of receiving the bonuses.

We have all heard of the stories of wasteful spending and needless losses to “get-rich-schemes,” including in some unfortunate circumstances, losses at the hands of robbers.

It is possible to avoid these losses through better planning and avoiding the carrying of large sums of cash. Those getting bonuses this year, remember, you and your families worked hard for that money, so use it wisely.

A final thought

The Minister of Finance, Economic Development & Investment Promotion will be presenting the National Budget for 2025 later this month in which the country’s financial outcomes for 2024 will be analysed and allocations made for the coming year.

This is usually accompanied by the chorus of supporters and critics, with very interesting insights being drawn from every statement and figure presented.

As usual, we will chime in with our own opinions and views, adding to the orchestra of discussion predictably defined by ideological biases that normally negates the objectivity of the numbers. But the show must go on as this has become part of the proceedings and tradition.

Businesses will extract the greatest value from the frenzied discussions as they tap into these diverse and varied insights to gain an advantage for themselves.

Individuals and households, on the other hand, will be given the now standard two sentences about tax-free bonuses and PAYE tax bands by most analysts.

Zimbabwe is a highly informalised economy in which households organise themselves to participate in the economy through numerous avenues.

An average Zimbabwean household is typically involved with some small business or venture popularly called “ka-project.”

This year, it might be worthwhile for households that don’t usually interact with the budget to take a bit of time to listen or go through it and pose some questions from it.

As we head towards the formalisation of the economy as the state seeks to improve tax collections to be able to deliver on the government’s mandates, it is important for stakeholders in the informal sector, mainly households to realise the risks and opportunities presented by these policies.

There is a need to start making contingency plans at that level to avoid being left behind or, worse, being caught offside.

The clear and present need to improve the quality and effectiveness of our national financial literacy initiatives in the face of a rapidly evolving economic situation is urgent.

Stakeholders in the financial services sector and indeed across the economy need to become more engaged and coordinated in the delivery of financial literacy resources as well as becoming more deliberate and intentional about the intended outcomes to be able to harness the full effects of having a financially educated population base.

Year-End Plans

This year, for the first time in a long time, our formal year will end with the National Budget Presentation & the post budget analysis, which we will prepare, circulate and publish within 2/3 days of the presentation.-ebsinessweel