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PREFACE
Savings Trainers Guide
Based on guidance from the Financial Education for the Poor Project, the initial savings learning sessions were developed by Michel Matul, Katarzyna Pawlak, and Krzysztof Guzowski of the Microfinance Centre in Poland in collaboration with their partners which also pilot tested the modules. These learning sessions provided the basis for the first generic set of savings learning sessions created by Kathleen Stack of Freedom from Hunger. The generic learning sessions were reviewed by Financial Education for the Poor partner organizations. Candace Nelson created the final version of the savings learning sessions with input from Kathleen Stack and Monique Cohen. The Content Note was written by Jennefer Sebstad and edited by Candace Nelson. Stacey Sechrest of Citi and Leslie Meek of Citi Foundation reviewed the final document.
MICROFINANCE OPPORTUNITIES Microfinance Opportunities was established in 2002 as a microenterprise resource center that promotes client-led microfinance. It seeks to help poor people increase their access to well-designed and delivered financial services. Microfinance Opportunities provides action-research, training and technical assistance in three areas focused on the clients of microfinance services: Financial Education, Microinsurance and Client Assessment.
FREEDOM FROM HUNGER Founded in 1946, Freedom from Hunger is a nonprofit, international development organization bringing innovative and sustainable self-help solutions to the fight against chronic hunger and poverty. Freedom from Hunger specializes in ensuring that the poor have access to microfinance and health protection services, and life skills training to achieve food security for their families.
CITI FOUNDATION The Citi Foundation, which makes grants in more than 85 countries around the world, focuses its funding primarily in three areas: financial education, educating the next generation, and building communities andentrepreneurs. Additional information can be found at www.citigroupfoundation.com.
ACKNOWLEDGEMENTS
The idea to develop a financial education curriculum for the poor grew out of a dinner-table conversation with Jayshree Vyas, the managing director of SEWA Bank. She argued, quite correctly, that financial literacy is critical for improving moneymanagement skills and promoting asset-building for the poor. When the idea was first proposed to Citi Foundation in 2002, financial education for microfinance clients was new and different. Aside from SEWA Bank, few, if any, institutions in developing countries had ventured into financial education. On the face of it, a major program to promote financial literacy in poor countries looked like a challenging venture, both for Microfinance Opportunities and for Citi Foundation. Freedom from Hunger had worked with SEWA on its financial literacy training program and was invited to become a major partner in 2003. Since then, there has been an outpouring of interest from microfinance practitioners who want to join the program. While many wondered out loud why it had taken the microfinance industry so long to recognize the importance of financial education, they immediately saw it as a win-win for both microfinance institutions and their clients. First and foremost we would like to thank Citi Foundation for investing in this program. Chip Raymond, the former President of the Foundation, and Leslie Meek, our Program Officer, took a double risk, embarking on a new area of microfinance and supporting a start-up organization, Microfinance Opportunities. They have been superior partners in their strong support for this work. Subsequently others from Citi have joined us in our work. They include Stacey Sechrest of Citis Office of Financial Education and Amy Feldman of Citi Foundation and they have provided valuable inputs as we have moved towards finalizing the curriculum. We want to express our appreciation to the partner organizations and their clients who made the development of this curriculum possible. They are Al Amana (Morocco), CARD Bank (Philippines), Equity Building Society (Kenya), the Microfinance Centre (Poland), Pro Mujer (Bolivia), SEWA Bank (India) and Teba Bank (South Africa). Over the three years of this project, they have worked diligently in conducting market research, as well as developing and testing training modules. We owe a huge debt of thanks to Candace Nelson for her technical and editorial contributions. It is also timely to express our appreciation of members of our staff who have provided us with the support to get the work done. They include Tracy Gerstle, Diana Tasnadi, Danielle Hopkins and Liz McGuinness of Microfinance Opportunities, and Christopher Dunford, Rossana Ramirez, Ellen Vor der Bruegge, Marc Bavois, Joan Dickey, Julie Uejio, Bobbi Gray and Wava Haggard of Freedom from Hunger. Monique Cohen Microfinance Opportunities Jennefer Sebstad, Consultant Microfinance Opportunities Kathleen Stack Freedom from Hunger
December 2005
TABLE OF CONTENTS
TRAINERS GUIDE
Learning Sessions at a Glance . . . . . . . . . . . . . . . . . . . . .1 Learning Sessions 1. Savings: What Are They and Why Save? . . . . . . . . . . . .5 2. Set Savings Goals . . . . . . . . . . . . . . . . . . . . . . . . . . .13 3. Increase Your Savings . . . . . . . . . . . . . . . . . . . . . . . .19 4. Save for Emergencies . . . . . . . . . . . . . . . . . . . . . . . .25 5. Decide How to Save . . . . . . . . . . . . . . . . . . . . . . . . .31 6. Compare Savings Services . . . . . . . . . . . . . . . . . . . . .35 7. Select Savings Products . . . . . . . . . . . . . . . . . . . . . . .41 8. Meet With the Providers of Savings Services . . . . . . . .49 9. Make a Savings Plan . . . . . . . . . . . . . . . . . . . . . . . . .59
CONTENT NOTE
Savings: You Can Do It! Content Note . . . . . . . . . . . . . . . .1
Introduction
to their clients, such as voluntary savings, insurance, and money transfers. That is the good news. The bad news is that clients often do not understand these new options and may not use them to their advantage. To date, MFIs promotion of their new products has not always included careful explanation and education about their features. To weigh alternatives and select the products most appropriate for their needs, clients need to understand how their features differ, how to calculate and compare their costs, and how to determine what they can afford. By focusing on informed and strategic decision-making, the Financial Education for the Poor Project goes beyond providing information. Its goal is to strengthen those behaviors that lead to increased saving, more prudent spending and borrowing for sound reasons. To achieve sustained behavior change, the curriculum is based on a learner-centered approach, capturing how adults learn best. It builds on what adult learners already know, makes the new content relevant to their lives, and provides the opportunity to practice the new skills. The Financial Education for the Poor Project developed five training modules over a three-year period spanning 2003 to 2005. Seven partners around the globe actively participated in the project, starting with market research in their countries to identify the priority topics, learning objectives and training methods, and culminating with curriculum design and testing. The participating partners were Teba Bank (South Africa), SEWA Bank (India), ProMujer (Bolivia), The Equity Building Society (Kenya), Al Amana (Morocco), CARD Bank (the Philippines) and the Microfinance Centre (Poland). Their commitment to this process has ensured that the financial education curriculum responds to the real needs of poor clients. This curriculum consists of five modules on five distinct topics. They are as follows: T Budgeting: Use Money Wisely T Savings: You Can Do It! T Debt Management: Handle With Care T Bank Services: Know Your Options T Financial Negotiations: Communicate With Confidence For each module, the curriculum offers: T a content note that provides basic discussion of the topic; T a trainers guide with detailed instructions for the conduct of each learning session in the module; and T a training of trainers manual to prepare those who will conduct the training. ii
You can choose to use these modules in any number and order that fits your training needs. You may only be interested in one or two of the topics covered by these modules; alternatively, you may want to start with budgeting and proceed through all of them. Because each module consists of multiple learning sessions that start with basic information and progress to more complex aspects of the topic, you can choose only those learning sessions within each module that address your specific needs. The next section, How to Use This Guide, provides more guidance on these options. Turn the page. Read on. The content notes and the Learning Sessions at a Glance section will give you a good idea of the content, while the step-by-step instructions for the trainer capture the participatory, learner-centered activities that make this training in financial education both fun and effective.
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Introduction
Savings: You Can Do It! is a complete training course to help people learn the benefits of savings and how to save. It contains both background information to orient you, the trainer, to the topic and step-by-step descriptions of learning activities you can carry out with trainees.
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Introduction
adult learning (see the Adult Learning Principles and Curriculum Design for Financial Education). They include stories, exercises, small-group discussions and role-plays which actively engage the participants in the learning process. They also promote teamwork and learning from peers. As you read the step-bystep instructions, give yourself permission to imagine a training session that is active, sometimes noisy, and fun. As the trainer, you will not be doing all the talking. Instead, you will be part of a dynamic learning process.
Most sessions require flip-chart paper, markers and tape. You will use these materials to record important points of participants discussions. As you fill each sheet of paper with their responses, you should tape it to a wall for display and reference. However, many items on the materials list will require that you prepare charts or checklists. All of these are provided for you in the guide, but you will need to re-create them in a large format that everyone can see. Most often this involves re-drawing the chart or table or form on a large piece of paper such as a flip chart or even inexpensive brown wrapping paper. Some sessions call for cards that you can cut from heavier card-stock paper (if it is not available, regular paper will do). Note if the instructions call for cards of different colors. Session #7 calls for you to prepare cards with specific scenarios on them before the session. Handouts mentioned in the step-by-step instructions are located at the end of each session. They should be photocopied and distributed to participants at the appropriate time. Dont underestimate the time you will need to prepare. You dont want to be caught unprepared in the middle of a session! If you are ready ahead of time, you can spend your time during the session facilitating and enjoying the process.
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Introduction
SESSION TITLE
1. Savings: What Are They and Why Save?
of savings
T Identify how to overcome savings
to save
T Identify actions that family can take
their consequences
T Practice estimating the amount of
1
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Introduction
T List conditions that help people save successfully T Debate which conditions we can and cannot
control
T List ways to save more
savings account 8. Meet with the T Identify financial institutions in the area Providers of Savings T Identify the key features of savings products that Services influence which ones are chosen
T Develop a list of questions to ask to learn about
these features
T Conduct an interview with bank employees T Process information gathered at the bank
T Practice making a savings plan T Select the savings services that best match a
familys goals
T Complete action plan for increasing their
own savings
Steps
The steps needed to complete the learning session are listed in the order in which they should be implemented. Special features for the trainer to note include the following: Italics font (italic) = instructions for the trainer (not to be read to the trainees) Regular font (regular) = specific information, instructions or questions for the trainer to read or closely paraphrase to the trainees Arrow () = symbol that highlights specific open questions to ask Box = special technical or summary information to share with the trainees Box with Shaded Borders = recommended flip-chart design to consider using with the trainees [Square Brackets] = the correct answer to expect from a technical question (Parenthesis) = additional instructions or information
Introduction
Each learning session guide in this module begins with a summary box that contains the following: T T T Learning objectives for the session. The estimated time you will need to conduct the session. A list of materials you will need to prepare before each session. Being prepared for the learning session will make your job much easier. Review this information carefully. A list of the steps for each activity. The guide provides detailed instructions for the learning activities that will help participants learn and work with the concepts of the session. Please follow the steps as outlined. However, you should use your own words to explain each point.
The box below is a reminder of some important principles and practices of adult learning to keep in mind as you lead each session. Remember that you, the trainer, do not have all the answers. The participants come to the learning sessions with a great deal of experience and have many things to add. It is important that all participants (including you) teach and learn.
the subject
T Be sure that throughout the session there is an opportunity for thinking,
SESSION 1
OBJECTIVES
BY THE END OF THE LEARNING SESSION, PARTICIPANTS WILL HAVE: 1. Defined savings 2. Described and categorized purposes of savings 3. Identified how to overcome savings difficulties
STEP 1
Introduce the Module on Savings
5
Say the following: MINUTES
TIME
80 MINUTES
PREPARATIONS/MATERIALS
T 3 BLANK CARDS FOR EACH
Welcome to the financial education training about savings. Through the activities in this module we will work with you to improve good savings practices. The following topics will be covered: 1. 2. 3. 4. 5. 6. 7. 8. 9. Savings: What Are They and Why Save? Set Savings Goals Increase Your Savings Save for Emergencies Decide How to Save Compare Savings Services Select Savings Products Meet with the Providers of Savings Services Make a Savings Plan
PARTICIPANT T FLIP CHARTS FOR USE IN THE FOLLOWING STEPS: Step 2: What Are Savings? Step 4: Blank flip chart with title Barriers to Saving Money T HANDOUT Step 3: 1.1: Instructions to Create an Imaginary Case Study Family T MARKERS T MASKING TAPE T FLIP CHART PAPER
STEP 2
Define Savings and Why People Save 30 MINUTES
Ask the large group the following question: What are savings? 5
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STEPS
1. Introduce the module on savings 5 MINUTES 2. Define savings and why people save 30 MINUTES 3. Create a case study family 30 MINUTES 4. Identify the difficulties of saving 15 MINUTES
Session 1
Listen to a number of responses from the group. Then post the following flip chart and summarize their ideas as you review each point.
Give each participant 3 cards and a marker. Ask the following: What are 3 reasons why people save? Write one reason on each card. Write large enough for all to see. When the participants are finished, ask them to post their reason cards on the wall. If participants do not read or write, encourage them to express their ideas in drawings, however simple, or allow them to call out the reasons and write each on a card for them. The reasons may include the following: T Sickness T Weddings T Funerals T Old Age T To pay for basic household items during a season of low income T Vacation or Travel T Emergencies T House T TV T Refrigerator T Motorcycle T Education T Home Improvement T Invest in Business 6
T Luxury Items T Childbirth T Gifts T Holidays/Festivals Next, say: Lets look at these cards again. What savings purposes are similar? Group the savings cards into similar categories based on participants suggestions. Ask: What can we name these categories? Help the participants come up with appropriate names for the different categories of savings. See the example below.
Optional Expenditures
T Vacation T Home
Building Assets
T House T Bicycle T Motorcycle T Car T Business
Improvement
T Luxury Items T Gifts
Festivals
T Low-Income
Season
Say: Every individual or family has different reasons to save. Saving helps us to protect against future unexpected events, plan for future anticipated events and build assets. It also permits us to enjoy the pleasures of life. But despite the obvious benefits of saving, many people do not do it.
Session 1
STEP 3
Create a Case Study Family
Explain the following: You are going to create an imaginary family to use in this savings training. Divide participants into 5 groups. Give the groups a brief description of their imaginary family (from the list below), and a flip chart and markers to draw it. T Grown couple with older children away from home. T Newly married couple just starting out. T Widow with four young children. T Couple with teenagers living in an area with frequent flooding. T Couple with three daughters. Hes a salaried worker and she is self-employed. Distribute Handout 1.1: Instructions to Create an Imaginary Family and read it, or ask participants to read it. INSTRUCTIONS TO CREATE AN IMAGINARY FAMILY (read aloud) Each group has a brief description of an imaginary family. Following these guidelines, draw the family members. In a balloon next to each family member, describe their characteristics. Include the following: T Their age T Their occupation (housewife, self-employed, salaried, student, etc.) T Their short- and long-term goals For your family, decide the following: T The level and frequency of income (daily, weekly, seasonal) T The type of housing they live in (the roof and wall materials) T Their assets Draw this information about income, housing and assets in the background of the picture.
30
MINUTES
Explain: You will have 10 minutes for this activity. Your example can be simpler than it would be in real life. We will use these families to explore the difficulties of savings and the tools that can help meet those difficulties. We can apply the lessons we learn to our own situations. Bring participants back together so they can present their imaginary families. Give each group 3 minutes to present. Ask the participants: How do these families remind you of your family? After hearing a number of responses, make the following point: Although these families are imaginary, examining their savings goals and difficulties will help us learn to deal with the difficulties in our own families.
STEP 4
Identify the Difficulties of Saving
Ask: Why is it difficult to save money?
15
MINUTES
Session 1
Write the answers on a flip chart. Acknowledge the barriers that participants have named.
Give the groups a few minutes to talk about the specific difficulties their case study family faces when trying to save. Ask someone from each group to report. Say: With all these difficulties in trying to build up savings, we know that saving is hard work. To save when you have little to start with requires sacrifice. In order to save, you will likely have to give up something important. It takes discipline. Ask: What can be done to overcome these barriers to saving? Ask for volunteers to share their ideas. Highlight the common themes. Be sure to include the following 2 rules of saving:
Explain that the sessions on savings will focus on learning how to confront some of the difficulties discussed today.
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HANDOUT 1.1
Instructions to Create an Imaginary Case Study Family
Session 1
11 Each group has guidelines for an imaginary case study family. Following these guidelines, draw the family members. In a balloon next to each family member, describe their characteristics. INCLUDE THE FOLLOWING: T T T Their age Their occupation (housewife, self-employed, salaried, student, etc.) Their short- and long-term goals
FOR YOUR FAMILY, DECIDE THE FOLLOWING: T T T The level and frequency of income (daily, weekly, seasonal) The type of housing they live in Their assets
Draw this information about income, housing and assets in the background of the picture.
SESSION 2
STEP 1
Say: We have talked about the different reasons people save. Now please find the group with which you created an imaginary family. In your groups, consider the following question. What are the savings goals of your imaginary family? List these goals on a piece of paper or remember them. After the participants have listed the goals, explain the following: T Savings goals can be short-term or long-term. T Short-term goals are those that will be reached in less than 1 year, such as paying school fees. T Long-term goals are those that will take more than 1 year to reach, such as home improvements or buying a house. (Note: The Content Note includes a third category of medium-term goals, defined as those that can be achieved in 13 years. To keep things simple for training, this Guide only presents 2 categories of goals: short-term, less than one year; and long-term, more than one year.) 13
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TIME
65 MINUTES
PREPARATIONS/MATERIALS
T FLIP CHART FOR USE IN THE
FOLLOWING STEP: Step 1: Savings Goals and Planning Worksheet T HANDOUTS Step 1 and 3: 2.1: Savings Goals and Planning Worksheet
STEPS
1. Set savings goals 35 MINUTES 2. Rank the importance of savings goals 10 MINUTES 3. Develop a savings plan for your own family 20 MINUTES
Session 2
35
MINUTES
Review the goals of your case study family. Separate the short- and long-term goals. Pass out Handout 2.1: Savings Goals and Planning Worksheet chart for planning savings goals to each group. Use the table to set savings targets for your imaginary family. Leave the last column blank for now. Post a flip chart of the table and demonstrate how to use it with the example provided. Give the participants about 20 minutes for this exercise.
Savings Goal Short-term Education Fees Emergency Fund Long-term New Roof
$120 $180
$720
In 36 months
$20/month
$1,020
$100/month
Ask each group to present its work. Encourage the other groups to ask questions.
STEP 2
Rank the Importance of Savings Goals
Explain: Review the savings goals you have set. Because it may not always be possible to reach all of your goals, you should know which ones are your priorities. Rank the goals of your imaginary family in order of importance using 1 for the most important, 2 for the next most important and so on.
10
MINUTES
14
When the groups have finished, ask 2 or 3 volunteers to answer the following: Why have you ranked the savings goals this way? Discuss the importance of saving for the most critical needs such as health, education and shelter.
STEP 3
Develop a Savings Plan for Your Own Family
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Say: Think about your savings goals for your own family. What do you need to save for in the short term? What future long-term goals do you have? To achieve your financial goals, you will need a plan that states each goal, the amount of money you will need to achieve that goal, and the amount you will save each week or month over a defined period. To make this plan, you must look at your income, determine how much you have available to set aside as savings, and decide your savings priorities. Which goals are most important to you? A clear plan will help you know what to do, increase your discipline to save and be more successful in reaching your savings goals. Distribute Handout 2.1: Savings Goals and Planning Worksheet. This time, give a copy to each participant, and ask him/her to complete it based on his/her own savings goals. Circulate among the participants and help as needed. If participants do not read and write, ask them to think of at least 2 short-term savings goals and 2 long-term savings goals. When they have identified their goals, ask them to answer the following questions for each goal: How much will it cost to reach this goal? When do you need the money? How much will you need to save every week or month? When nearly everyone has finished, ask the following: Which goal is most important, next in importance, and so on? When nearly everyone has finished, ask the following: How is setting your own savings goals different from doing it for an imaginary family? 15 MINUTES
Session 2
How are your priorities (the way you ranked your goals) different from those of the imaginary family? Explore the way participants feel about setting goals for their own families: How do you feel when setting goals for your own family? How much more difficult is it to think about your own savings goals and priorities? Why? Then ask: What did you learn about how your family could save more? Acknowledge how difficult it can be to develop savings goals. Thank everyone for taking on the challenge!
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HANDOUT 2.1
Savings Goals and Planning Worksheet
AMOUNT OF SAVINGS RANKING OF REQUIRED PER IMPORTANCE WEEK OR MONTH
SAVINGS GOAL
WHEN NEEDED?
Short-term
Long-term
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Session 2
SESSION 3
STEP 1
Explain How to Save Using a Story 30 MINUTES
Ask the following: What can people do to save more money? [Cut spending, save a portion of income as soon as it is earned, invest and use a portion of returns, have less debt, etc.] Summarize the ideas of the group, making the following points.
45 MINUTES
PREPARATIONS/MATERIALS
T HANDOUT
STEPS
1. Explain how to save using a story 30 MINUTES 2. Reinforce the rules of saving with a song 15 MINUTES
The amount you can save depends on the amount of money you have available. For many people, having money to save depends on the time of year. Let us examine one familys situation and determine the amount they can save and when. Read the story to the group, or pass it out with the questions if the participants read well, and ask them to read the story. 19
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Session 3
TIME
MARIAS FAMILY Maria and her husband, Jorge, live on the outskirts of a major town. She has a small sidewalk restaurant and he works as a day laborer on a big farm. They have 4 children: Joseph, age 13; Orianna, age 10; Lulu, age 4; and baby Aris, age 10 months. They work hard just to pay for food and rent. They struggle each year to pay school fees for Joseph and Orianna in October and February. In the cold season, November February, expenses are high for fuel and energy. The business does not do well at this time. Maria takes loans from an MFI every year in early December. She borrows often from her womens group to supplement MFI loans and pay for school and emergencies. MFI loan payments are due monthly. She sometimes uses one loan to make payments on the other one. Jorge works at the restaurant during the cold season when there is no other work available. The restaurant does well during the warm season, JuneAugust, and around the holidays in December and April. It is tradition for the family to buy new clothes and hold a big party during each of the holidays. Ask the participants: What are the savings goals of Marias family? [Emergency funds, school fees, getting through the cold season, invest in the business to reduce loans required] List the goals on a flip chart. Then ask participants to rank the goals in order of priority. What are the most important, next most important (and so on) goals for Marias family? Write a number 1, 2, 3..and so on after each goal. Please form groups of 5 and discuss how to answer the following question. Be prepared to report back to the large group after 5 minutes. When and how can Marias family save? Make sure the following points are covered by the groups: T Save during the summer when the restaurant is doing well. T Reduce holiday spending and save the money instead. T Reduce the amount of loans. T Take a small amount of income out of restaurant sales during the warm season and the holidays.
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T Start another business during low periods for the restaurant and save some of the earnings. T Purchase food and supplies in bulk when there is money, and therefore save on expenses. Tell the participants the following: Take a few minutes to write down (or think about) 2 ways your own family can save more based on what you have learned. After a few minutes, ask for volunteers to share their ideas.
STEP 2
Reinforce the Rules of Saving with a Song 15 MINUTES
Explain: With savings, taking action can be harder than discussing ideas. It is easy to understand why saving is so important for our financial security, but harder to actually save. We have identified the many difficulties to saving that many of us know well. It is easy to conclude We have no money to save. It is much harder to force ourselves to find a little something to save each day or each week, even if it is only a penny. To do this, you must follow the basic rules of savings we discussed above. Divide participants into 2 groups and assign each group 1 of the savings rules. Their task is to make up a short song about this rule.
Explain: Each group will make up a short song to sing about their assigned savings rule. Your tune should be easy to remember so that you can sing the song often. You can use a tune you already know, or make up a new one. The song can include other words as well or simply repeat the savings rule to music. Give them 10 minutes for this exercise. 21
Session 3
Ask the groups to perform and teach their song to each other. Thank the participants for their hard work, creativity and musical entertainment! (Note: Have fun with the song! It may seem awkward at first, but if participants come up with a song that is funny, or memorable in some other way, you should ask them to sing it again periodically throughout the training. You can offer a prize to whomever remembers the song, whomever volunteers to sing it, whomever initiates singing at the end of a session, etc. Use your own creativity!)
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HANDOUT 3.1
Marias Family
Maria and her husband, Jorge, live on the outskirts of a major town. She has a small sidewalk restaurant and he works as a day laborer on a big farm. They have four children: Joseph, age 13; Orianna, age 10; Lulu, age 4; and baby Aris, age 10 months. They work hard just to pay for food and rent. They struggle each year to pay school fees for Joseph and Orianna in October and February. In the cold season, November February, expenses are high for fuel and energy. The business does not do well at this time. Maria takes loans from an MFI every year in early December. She borrows often from her womens group to supplement MFI loans and pay for school and emergencies. MFI loan payments are due monthly. She sometimes uses one loan to make payments on the other one. Jorge works at the restaurant during the cold season when there is no other work available. The restaurant does well during the warm season, JuneAugust, and around the holidays in December and April. It is tradition for the family to buy new clothes and hold big parties during the holidays. What are the savings goals of Marias family? What are the most important, next most important (and so on) goals for Marias family?
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Session 3
SESSION 4
OBJECTIVES
BY THE END OF THE LEARNING SESSION, PARTICIPANTS WILL HAVE: 1. Listed the types of emergencies and their consequences 2. Practiced estimating the amount of money needed for emergencies 3. Described how they can cope with emergencies by having an emergency fund 4. Included emergencies in savings goals
TIME
65 MINUTES
PREPARATIONS/MATERIALS
T FLIP CHARTS FOR USE IN THE
FOLLOWING STEPS: Step 1: Flip chart with 2 blank columns labeled Type of Emergency and Consequences Step 2: How Much Money Should You Save for Emergencies? Marias Family Earnings Flip chart with blank 2 columns labeled Difficulties and Advice T FLIP CHART PAPER T MARKERS
STEPS
1. List emergencies and their consequences 15 MINUTES 2. Estimate the amount of money needed for emergencies 30 MINUTES 3. Discuss how to maintain the emergency fund 10 MINUTES 4. Include emergencies in the savings goals 10 MINUTES
Session 4
Emergency and Consequences(see below). Then ask each group to report on a different type of emergency and the consequences. Record their ideas on a flip chart.
Type of Emergency
Consequences
When they are finished, summarize by saying: Emergencies mean immediate costs to the family. The costs may include medical bills, rebuilding from a disaster, replacing stolen goods or keeping up loan payments even after you have lost your business. If a principal income earner is unable to work due to an emergency, the family will lose even more income.
STEP 2
Estimate the Amount of Money Needed for Emergencies 30 MINUTES
Ask participants the following question: What can be done to cope with such emergencies? After hearing a few ideas, say the following: Every family should have an emergency fund to handle relatively small emergencies. It cannot replace a house or pay for a long-term illness. The emergency fund is an important reason for saving as it can help you manage many smaller unexpected events and prevent further losses. The rule for the amount of money to be kept in the emergency fund is as follows:
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The more people you care for, the more money you are likely to need for emergencies and unplanned events. Larger families should keep 6 months average monthly income in an emergency fund. Let us practice estimating how much money to put in an emergency fund. Show Marias family earnings on a flip chart. Here are Marias family earnings each month for one year.
Amount
$15 $15 $15 $40 $25 $35 $35 $40 $20 $20 $10 $30 $300
What is the total amount Marias family needs to keep in an emergency fund? Demonstrate on a flip chart or board how to calculate the amount of money to keep in an emergency fund.
27
Session 4
divided by 12 months in year = Average monthly income divided by 12 months in year = $25
Three times her average monthly income: $25 x 3 = $75 Marias family needs to have $75 in an emergency fund. In your groups, examine your imaginary familys situation and decide how much they need to keep in an emergency fund. Give the groups about 10 minutes for this exercise. Bring the groups back together to share their responses. Ask the following questions: What are the difficulties that a family can have in trying to set aside this much money? What is your advice to them? List the difficulties and the advice on a flip chart similar to the one below:
Difficulties
I barely have enough money to feed my family and pay for other basic necessities.
Advice
T Start setting aside something, even
if it is only a very small amount, every day or every week. The amount will grow.
T Look hard for ways to cut unnecessary
spending. When I save, my husband always asks to use the money I have saved. My income is irregular. I must use all the available earnings to pay off debts.
T Keep money in a secure location,
Make the following point: Remember, the purpose of your emergency fund is to cover small emergencies. Most of us will not be able to keep enough money to cover big losses such as our homes or a crop.
28
STEP 3
Discuss How to Maintain the Emergency Fund
10
Explain: You will need your emergency fund from time to time. As you use it, it will decrease. What are your suggestions to maintain enough money in the emergency fund? Summarize the ideas, making the following points. T When you use the fund, replace the money as soon as possible. T Decide how much you can contribute to the emergency fund each day, each week or each month, and stick to your plan. MINUTES
STEP 4
Include Emergencies in the Savings Goals
10
MINUTES Ask the participants to get back into groups to discuss their case study families. Say:
What changes will you make to the goals of your imaginary family to address emergencies? Give the groups 5 minutes to review the goals and make changes. Ask for 2 or 3 volunteers to share their changes. Close the meeting, saying: If you plan ahead for emergencies, you will have more success reaching your other goals. With an emergency fund you can avoid using the savings you have for goals such as education and housing improvements. You can also avoid costly borrowing.
29
Session 4
SESSION 5
STEP 1
Identify Factors that Best Help People to Save 15 MINUTES
Tell participants the following: Form groups of 5. Select a recorder to list the responses to the following question. What makes it most likely that people will save? List everything you can think of in 5 minutes, and then we will see which group has come up with the most ideas. While they are working, post the flip chart titled Internal/External Factors Influencing Savings. After 5 minutes ask the groups to tell you how many ideas they have. Congratulate the group with the most ideas. Ask this group to report all of its ideas and list them on a flip chart. Then ask the other groups to add any ideas that have not been mentioned. The ideas may include the following:
TIME
35 MINUTES
PREPARATIONS/MATERIALS
T FLIP CHART FOR USE IN
FOLLOWING STEP: Step 1: Internal/External Factors Influencing Savings T FLIP CHART PAPER T MARKERS
STEPS
1. Identify factors that best help people to save 15 MINUTES 2. Decide how to save 20 MINUTES
31
Microfinance Opportunities T Citi Foundation T Freedom from Hunger
Session 5
Now, lets look at this list and underline those items that we ourselves can control. These are all things that do not depend on other people or external or environmental factors. Differences of opinion are likely to emerge as the group identifies those factors within our personal control. When there are differences, encourage a short debate between persons with different opinions. Ask a person who thinks it is within our control, to answer the question: Why is this condition for saving within our control? Then ask a person who thinks it is not within our control to answer the question: Why is this condition for saving not within our control? Then say: Often people will say things are outside their control when they are really within their control. They are not confident that they can take action to save. They give up too easily. It is important to recognize those things that are in our control.
32
STEP 2
Decide How to Save
Give the following instructions: Select a partner. Pretend that 1 of you does not save while the other is a good saver. The good saver is going to tell her partner how she can save more. Raise your hand if you are role-playing the good saver. When all of the partners have decided who is the good saver, start the exercise. Give the small groups 5 minutes. Then ask 4 or 5 volunteers to tell the group what they discussed. What are the ideas you shared about how to save more? Summarize the ideas given by the volunteers. Make sure to cover the ideas listed below. To help you save more, you can T T T T T T T T decide to save more decide what amount you want to save every day or week find ways to spend less and save the money for more important things set aside some of your earnings or goods as savings learn about the savings services available in your community open a savings account agree with other family members to help each other make regular savings find people who save and ask them for ideas about how to save more
20
MINUTES
Summarize the discussion by saying: You have identified many ways to save during this session. You do not need to have a lot of money to save. Everybody can save a little money on a daily or weekly basis. You need a plan and the discipline to stick to it by controlling your spending. If we apply these things we can increase our ability to save. Ask for a few volunteers to respond to the following question: What is one thing you will do this week to help yourself save? Encourage the participants to put their ideas into action. Thank them for their good work. 33
Session 5
SESSION 6
OBJECTIVES
BY THE END OF THE LEARNING SESSION, PARTICIPANTS WILL HAVE: 1. Identified savings options 2. Distinguished between formal, semi-formal and informal savings services 3. Described the advantages and disadvantages of formal, semiformal and informal services, including degree of risk 4. Identified the features of savings services that will influence their choice
TIME
70 MINUTES
STEPS
1. Identify savings vehicles that are available to people in this community 25 MINUTES 2. Discuss the advantages and disadvantages of different methods of savings 25 MINUTES 3. Determine which savings service is safest 10 MINUTES 4. Identify features that might influence our choice of savings service 10 MINUTES
Session 6
An informal savings vehicle is one you manage yourself, usually at home. You may keep your savings in cash, or jewelry or livestock. Savings of this nature does not have oversight from a government agency. Now return to the list of savings methods people use in this community. Invite the group to help you decide whether each is a formal, informal or semi-formal way to save. Mark Informal with an I, Formal with an F and Semi-Formal with an S. See the chart below to assist you.
Formal
T Bank T Credit Union T Regulated MFI T Post Office
Semi-Formal
T Groups: savings and
Informal
T At Home (in cash) T In Kind (gold, jewelry,
Cooperative
For each category, ask participants to raise their hands if they respond positively to the following question: Who has used one of the services in this category? Announce to the group that those who raised their hands are the resource people for this category. Ask them the following: How does the service work (deposit and withdrawal requirements, interest, etc.)? How have you used the service? For each category of service, invite the group to ask the resource persons questions about the service. Clarify when necessary and keep a list of issues that remain unanswered or unresolved.
36
STEP 2
Discuss the Advantages and Disadvantages of Different Methods of Savings 25 MINUTES
Divide the participants into small groups (it is recommended to mix the teams as the task does not concern the case study families). Put the different types of savings services on cards. Ask each group to pick 1 or 2 cards. Give the groups the following instructions: For each savings service you have selected, discuss its advantages and disadvantages. Give the groups 5 minutes for this exercise. While they are working, post a blank table as shown below, drawn on a flip chart.
Savings Service
Formal
Advantages
Disadvantages
Risk Rating
Semi-Formal
Informal
37
Session 6
When they have completed this discussion, bring the groups back together and ask them to put their Service Card in the Savings Service column and report their ideas about its advantages and disadvantages. Write their ideas in the appropriate columns on the flip chart. The result will look something like the table below:
Savings Service
Formal Banks Post Office Credit Union Regulated MFI
Advantages
T Safest option T Less temptation to withdraw and spend T May earn interest
Disadvantages
T Low remuneration T Minimum deposit required to open account may be barrier
Risk Rating
T Access to wider range T May charge fees of savings products T Long lines and delays (certificates of deposit, inside bank current account, T Can be confusing pension funds, etc.) T Less accessible to poor T Helps to manage money and those who cannot read and write T Can save time on bill payments
Semi-Formal Savings with T Easy access Group (village T Savings often linked to bank, noncredit regulated savings T May earn dividends on and credit loans made with association, etc.) savings ROSCAs T Group rules about Deposit Collectors frequency and amount of deposits encourages saving T Discipline Informal At Home (in cash) T Easy access T Not safe T Too easy to spend and waste on non-essential items T Safety not guaranteed T May or may not earn interest T May have limited or no access to loans T Limited access to savings or withdrawals subject to group approval
In Kind (gold, T Value might increase jewelry, livestock, over time land, etc.) T Must sell to access cashdecreases temptation
T Difficult to liquidate in case of emergency T Value could decrease over time T Risk of theft or death (in case of animals)
38
STEP 3
Determine Which Savings Service is Safest 10 MINUTES
Ask: What bad things can happen to your savings? [Savings gets stolen or lost, loses value, gets used to pay my own bad debts or the bad debts of others, used by family members, not available due to problems with the bank or MFI.] Look at all the types of savings services we have talked about and answer the following question. What savings services are safer than others? Why? Ask for a few volunteers to give their ideas and then explain: We are going to evaluate each service for how safe your money is there. We will use a scale of 1, 2, 3 to rate each service. One is low safety. Two is average safetysort of safe. Three is very safe. Return to the chart and point out the last blank column. Ask participants to consider each service and give it a 1, 2, or 3 depending on how safe they think it is. For each service, call on 3 volunteers to share their ranking and fill in the squares in this last column with their votes. If participants disagree, encourage discussion to air all points of view.
STEP 4
Identify Features that Might Influence Our Choice of Savings Service 10 MINUTES
Say: We have many ways to save, each with its own positive features and weak points. Some of us might be most interested in earning the highest possible interest rate; others might be more concerned about convenience and look for the closest place to save. Ask: What are the characteristics of savings services that are important to consider when selecting a service? 39
Session 6
Solicit a number of responses and write them on a flip chart. If all of the following are not named, add missing items from below to the list.
Ask participants to turn to the person next to them and exchange their ideas about which of these elements would be or is MOST important to them: If you had to choose one item from this list as the MOST important factor when selecting a savings vehicle, which would you choose for yourself? Why? After 5 minutes, ask several people to share their partners choice and why it is important. Make the following point: Savers choose different kinds of services because they each have different needs and priorities. It is important that you choose the service that is right for you.
40
OBJECTIVES
BY THE END OF THE LEARNING SESSION, PARTICIPANTS WILL HAVE: 1. Stated the features of different savings accounts offered by formal banks 2. Matched savings goals with specific savings products 3. Identified the appropriate use for each type of savings account
TIME
45 MINUTES
PREPARATIONS/MATERIALS
T FLIP CHART FOR USE IN THE
FOLLOWING STEP: Step 2: Formal Institution Savings Products T HANDOUT Step 2: 7.1: Formal Institution Savings Products T CARDS Step 3: Scenario #14
STEPS
1. Match savings products to savings goals 10 MINUTES 2. Present and discuss formal savings institution savings products 10 MINUTES 3. Select a product to match specific savings goals 20 MINUTES 4. Determine which type of account would be most helpful 5 MINUTES
41
Microfinance Opportunities T Citi Foundation T Freedom from Hunger
Session 7
SESSION 7
Ask the participants: What is an example of a short-term savings goal? What is another example? What is an example of a long-term savings goal? What is another example? Thank you for these examples. As you remember, a short-term savings goal is for an expenditure you expect to occur within 1 year. A long-term savings goal is one you expect to occur perhaps in 2 or 3 or even more years. Explain the following: Whether you are saving for a house or school fees for next term, you are putting money aside and resisting the temptation to spend it. How do you think your savings goal will influence how you save? [For short-term goals, you put aside as much money as you can within a defined period of time. When that period is over, you withdraw your savings to meet the goalto pay the school fees or attend a family wedding, for example. Then you start saving all over again. For long-term goals, you may save a smaller amount on a regular basis over a longer period. You hope not to withdraw it and just keep saving until you reach your goal.] Explain: Banks have various savings products that are tailored to your savings goals. The longer you agree to leave your money in the bank, the higher the interest rate the bank will pay. If you need to make frequent withdrawals, you will likely have an account that earns a lower interest rate. Ask: What features of a savings account will help you save when you are saving for the long term? [high interest rates; limited withdrawals] Now, lets say you are saving for your childs school fees that are due every 3 months. What features do you want your savings account to have? [unlimited deposits and withdrawalsfrequent access] You can see that different savings goals require different savings products. Let us now learn about the typical type of savings product available at financial institutions.
42
STEP 2
Present and Discuss Formal Savings Institution Savings Products 10 MINUTES
Explain that 1 of the advantages of saving at a formal financial institution, such as a bank, is that there is a choice of savings accounts. Tell the participants that they will learn about the most common accounts. Post the prepared flip chart below and review.
Regular or Passbook T Voluntary timing and amount Savings of deposits. T Flexible withdrawals. T May or may not pay interest.
T Regular deposits of fixed amount over a pre-determined period of time. Client can decide how much to save for how long (choosing from a pre-set range of terms). T Access to savings restricted until contract is fulfilled. T Penalty is paid for early withdrawal. T Interest usually higher than regular savings account. T Can borrow against your savings.
Time Deposit
T Fixed sum for a predetermined term and rate of interest. T Requires minimum deposit. T Inflexible. T Pays a higher interest rate than either a passbook or a contractual savings product for same amount of savings.
T For larger needs expected in future such as marriage, or a major capital purchase.
43
Session 7
Ask: Which account do you prefer? Why? Distribute Handout 7.1: Formal Institution Savings Products.
STEP 3
Select a Product to Match Specific Savings Goals
20
MINUTES Divide participants into 2 teams. Give each team 2 scenarios below written on cards. Teams will take turns reading a scenario aloud and asking the other team to decide which savings product is best suited to the saver described in the scenario.
SCENARIO #1
Elena wants to save for her daughters wedding next year. She has almost nothing saved now, but if she puts aside $5 every week for a year, she will have just enough for the wedding. So, she cant be tempted to dip into these savings for anything else. [Answer: Contractual Savings Account]
SCENARIO #2
Maria has just completed a learning session on savings for emergencies. Now she is determined to save every month, even if she can only afford a small deposit. She doesnt know what she might need the money for now, but she doesnt want an unexpected illness or accident to ruin her family. [Answer: Passbook savings will allow her to make small deposits whenever she can and withdraw money when she needs to. Since she does not know when she might need to withdraw money for an emergency, she probably wouldnt want restricted access that would force her to pay a penalty if she takes money out before her contract period is up.]
44
SCENARIO #3
Anita just received $200 from her son who is working abroad. She could spend this money on any number of important things, but she really wants to put it away for her daughters university education. Although her daughter wont go to university for another 3 years, Anita knows that she will need a lot of money. [Answer: Since Anita does not plan to spend this money for 3 years, a time-deposit account will earn the highest interest and keep her money safe from temptation to spend it on other things, as penalties are charged for early withdrawals.]
SCENARIO #4
Nina needs a place to save a portion of her sales earnings from her used clothing stall. She needs to save for the monthly delivery of clothing bales. She wants to be able to save weekly and withdraw the amount she needs every month to buy a new bale of clothing. [Answer: Passbook savings operate like a current account for regular deposits and withdrawals. Nina will trade access to her account for income and growth, as these accounts typically pay a very low interest rate.]
STEP 4
Determine Which Type of Account Would be Most Helpful
Ask: In your case study family, which type of savings account would be most useful? Would you be interested in more than one type of account? Why? Ask if participants have any other questions about savings products that banks offer. Discuss and clarify any remaining issues. Ask: What will you share from this lesson with your family? Listen to the ideas of 2 or 3 volunteers. Thank the participants for their good work. 45
MINUTES
Session 7
Scenario Cards
SCENARIO #1 Elena wants to save for her daughters wedding next year. She has almost nothing saved now, but if she puts aside $5 every week for a year, she will have just enough for the wedding. So, she cant be tempted to dip into these savings for anything else. [Answer: Contractual Savings Account] SCENARIO #2 Maria has just completed a learning session on savings for emergencies. Now she is determined to save every month, even if she can only afford a small deposit. She doesnt know what she might need the money for now, but she doesnt want an unexpected illness or accident to ruin her family. [Answer: Passbook Savings will allow her to make small deposits whenever she can and withdraw money when she needs to. Since she does not know when she might need to withdraw money for an emergency, she probably wouldnt want restricted access that would force her to pay a penalty if she takes money out before her contract period is up.] SCENARIO #3 Anita just received $200 from her son who is working abroad. She could spend this money on any number of important things, but she really wants to put it away for her daughters university education. Although her daughter wont go to university for another 3 years, Anita knows that she will need a lot of money. [Answer: Since Anita does not plan to spend this money for 3 years, a time-deposit account will earn the highest interest and keep her money safe from temptation to spend it on other things, as penalties are charged for early withdrawals.] SCENARIO #4 Nina needs a place to save a portion of her sales earnings from her used clothing stall. She needs to save for the monthly delivery of clothing bales. She wants to be able to save weekly and withdraw the amount she needs every month to buy a new bale of clothing. [Answer: Passbook savings operate like a current account for regular deposits and withdrawals. Nina will trade access to her account for income and growth, as these accounts typically pay a very low interest rate.] 46
HANDOUT 7.1
Formal Institution Savings Products
HOW IT WORKS
USES
T Emergencies and unexpected opportunities. T If only one product can be offered, this type of product often is the one that best meets client demand.
Regular or Passbook T Voluntary timing and amount Savings of deposits. T Flexible withdrawals. T May or may not pay interest.
Contractual Savings T Regular deposits of fixed T For expected needs. amount over a pre-determined period of time. Client can (Also known as decide how much to save for accumulated how long (choosing from a deposit, fixed-term pre-set range of terms). account) T Access to savings restricted until contract is fulfilled. T Penalty is paid for early withdrawal. T Interest usually higher than regular savings account. T Can borrow against your savings. Time Deposit T Fixed sum for a predetermined T For larger needs expected term and rate of interest. in future such as marriage, or a major capital T Requires minimum deposit. purchase. T Inflexible. T Pays a higher interest rate than either a passbook or a contractual savings product for same amount of savings.
47
Session 7
TIME [In this session, the 3 time periods below may occur on different days] PREPARATION: 75 MINUTES FIELD VISIT: 2 HOURS DEBRIEFING: 45 MINUTES PREPARATIONS/MATERIALS T PREPARE THE FIELD VISIT FOR PARTICIPANTS (At several local financial institutions, arrange a meeting for bank staff and a small group of participants. Know the name of the person you will meet and the time of the meeting. Collect brochures and other product promotions from the banks you plan to visit and bring them to the training.) T FLIP CHART FOR USE IN THE FOLLOWING STEP: Step 2: Flip chart with 2 blank columns labeled Important Conditions for Saving and Questions to Ask T HANDOUTS Step 2: 8.1: Questions to Ask at the Bank 8.2: Questions to Ask at the Bank (with suggested questions) Step 4: 8.3: Field Visit Report Form STEPS 1. Recall the different savings services 5 MINUTES 2. Assess formal institutions savings products 45 minutes 3. Determine how well bank literature answers questions 15 MINUTES 4. Finalize preparations for the visit to the bank 10 MINUTES 5. Report on the meeting with the providers of savings services 45 MINUTES
STEP 1
Recall the Different Savings Services 5 MINUTES
Ask the participants: What are the different categories of savings services we talked about at our last meeting? [Informal, Semi-Formal and Formal] What are some of the differences between informal and formal savings services? [Safety, interest rates, choice of savings product, convenience, access to savings withdrawals] Explain that today we will be preparing for our visit to some of our local banks to conduct interviews with bank employees to learn more about their services. To prepare, we are going to start by reviewing the features of a savings service that will be important for us to consider in choosing the one we would like to use.
49
Microfinance Opportunities T Citi Foundation T Freedom from Hunger
Session 8
OBJECTIVES BY THE END OF THE LEARNING SESSION, PARTICIPANTS WILL HAVE: 1. Identified financial institutions in their area 2. Identified the key features of savings products that influence which ones we choose 3. Developed a list of questions to ask to learn about these features 4. Conducted interviews of bank employees 5. Processed information gathered at the bank
SESSION 8
STEP 2
Assess Formal Institutions Savings Products
45
Ask: Do you know the answer to the question: Where is the best place to put your savings? Explain: Although the answer to this question may be different for each of us, we can work together to prepare questions that will help us answer it. Let us first review the characteristics of savings services to consider. Display the table below, drawn with headings only on a flip chart. Ask: What are the factors that influence how we select a bank? MINUTES
Questions To Ask
Use their answers to fill in the left side of the chart. Distribute Handout 8.1: Questions to Ask at the Bank to participants.
50
Questions To Ask
Ask: What conditions are on the handout that are different from the ones you identified? What questions do you have about these conditions? Respond to the questions. Split the participants into six groups. Assign each group 1 of the conditions in the left column of the chart. For example, 1 group will take Access, 1 will take Opening Deposit Requirements, etc. Ask each group to answer the following question: What questions will you ask to find out what the bank policies are regarding this specific aspect? Give the groups 10 minutes for this exercise. If convenient, have them write the questions for their item on the flip chart. Ask each group to present its questions to the large group. At the end of the presentations, distribute Handout 8.2: Questions to Ask at the Bank which has suggested questions. Ask participants to compare their questions with those on the handout: What questions will you add to your list? Listen to their ideas.
51
Session 8
Questions To Ask
How often can I make withdrawals? Is there a minimum amount I must withdraw? What withdrawal penalties does this account have? Is there an ATM network?
How much savings is required? What documentation do I need? What are the banks hours? How long is the wait to be served? Do clients receive account statements? How often? Do you offer telephone and/or electronic transactions?
Safety
What is the reputation of the institution? What insurance or guarantees safeguard clients funds?
What is the interest rate on savings? How does it compare to other institutions? How often is interest paid? How is interest calculated? For example, is it a compound rate? (Is interest paid on both the principal and accrued interest?)
What fees are charged? (transfers, ATM withdrawal fee) How easy is it to withdraw funds from the account? Will the full amount be available? Are fees charged if the funds are withdrawn before a specified date?
52
Conclude by saying: You can see that interest earned is only one of the considerations, and sometimes it is not the most important one. Each of us will have to choose which of these features matters more to us in relation to our savings goals.
STEP 3
Determine How Well Bank Literature Answers Questions
15
MINUTES
Display information about local savings services around the room. Ask participants to select brochures to look at and prepare to share their observations with the whole group. Say: The banks use their own language to describe their services. Read the brochures and think about 2 questions: Which of our questions does the banks literature answer? What products meet your imaginary familys needs for saving? Give them 10 minute to review the banks brochures and handouts. Then ask for a few volunteers to respond. Ask the entire group: How do you think the services offered respond to the conditions we discussed before? Name the conditions and ask for volunteers to comment on each one. T T T T T T T Access to Savings/Flexibility of Withdrawal Opening Deposit Requirements Convenience/Ease of Use Safety Interest Earned on Savings Cost of Savings Liquidity
Summarize the discussion by saying: We need to understand the terms and conditions of each institutions products to determine whether they are right for us. The same product will be slightly different at each bank. 53
Session 8
STEP 4
Finalize Preparations for the Visit to the Bank
10
MINUTES Organize participants into their field trip groups and ask each group to finalize the list of questions they want to ask at the bank. They may use the list generated earlier in the session or revise the list depending on the information that was provided in the bank literature. Each group should also select an interviewer and recorder for the field trip. Conclude: Use the opportunity of the field visit to find out about the available services in your area that match your own real families goals. We will all gather information and share it at the next session. Distribute Handout 8.3: Field Visit Report Form to each group.
STEP 5
Report on the Meeting with the Providers of Savings Services 45 MINUTES
Give each group 15 minutes to assemble the information from the field visit and prepare its report. Give each group 5 minutes to report on 1 savings product they learned about and how it fits an important savings goal of their case family. After each report ask the participants the following: What were the most attractive features of the bank you visited? What were the least attractive features of the bank you visited? At the end of the reporting, ask: What did you learn from this exercise that you can apply in your own life? Give 2 or 3 volunteers an opportunity to share. Thank the group for their hard work. 54
HANDOUT 8.1
Questions to Ask at the Bank
QUESTIONS TO ASK
Convenience/Ease of Use
Safety
Cost of Savings
Liquidity
55
Session 8
HANDOUT 8.2
Questions to Ask at the Bank
(with Suggested Questions)
IMPORTANT CONDITIONS FOR SAVING
Access to Savings/Flexibility of Withdrawal
QUESTIONS TO ASK
How often can I make withdrawals? Is there a minimum amount I must withdraw? What withdrawal penalties does this account have? Is there an ATM network?
Convenience/Ease of Use
What are the banks hours? How long is the wait to be served? Do clients receive account statements? How often? Do you offer telephone and/or electronic transactions?
Safety
What is the reputation of the institution? What insurance or guarantees safeguard clients funds?
What is the interest rate on savings? How does it compare to other institutions? How often is interest paid? How is interest calculated? For example, is it a compound rate? (Is interest paid on both the principal and accrued interest?)
What fees are charged? (transfers, ATM withdrawal fee) How easy is it to withdraw funds from the account? Will the full amount be available? Are fees charged if the funds are withdrawn before a specified date?
56
HANDOUT 8.3
Field Visit Report Form
Institution Visited: Contact Persons Title:
For each different product at the bank you visit, fill out the table as necessary. Product: Savings Goal:
FEATURES
Access/Flexibility
DETAILS
Safety
Cost of Savings
Liquidity
57
Session 8
SESSION 9
STEP 1
Modify Savings Goals and Develop Savings Targets
40
MINUTES
TIME
100 MINUTES
PREPARATIONS/MATERIALS
T FLIP CHARTS FOR USE IN THE
Ask participants to return to their case study family groups. Tell them: Look at Handout 2.1: Savings Goals and Planning Worksheet that you completed in Session 2. Make modifications based on what you have learned about savings.
FOLLOWING STEP: Step 1: Savings Targets Tips for Savings T HANDOUTS Step 1: 2.1: Savings Goals and Planning Worksheet (from Session 2) 9.1: Savings Targets Worksheet Step 2: 9.2: Selecting Savings Services Worksheet 9.3: Rules of Thumb for Savings
STEPS
1. Modify savings goals and develop savings targets 40 MINUTES 2. Match savings goals to the best savings service 30 MINUTES 3. Prepare a plan to apply what you have learned 30 MINUTES
Microfinance Opportunities T Citi Foundation T Freedom from Hunger
59
Session 9
Example:
Savings Goal
Short-term Education Fees Emergency Fund Long-term New Roof Total Savings Required
When Needed?
In 6 months In 3 months
$720 $1,020
In 36 months
$20/month $100/month
Explain: For your imaginary family to meet its savings goals, determine how much they will have to save each week or month. Post and review completed example below:
SAVINGS TARGETS
Months
Savings Goals Education Emergencies Roof Repair 1 20 60 20 2 20 60 20 3 20 60 20 20 40 20 40 20 40 20 20 20 20 20 20 20 20 20 20 20 20 4 20 5 20 6 20 7 8 9 10 11 12
60
Distribute Handout 9.1: Savings Targets Worksheet. Ask the participants to do the following: In your case study groups, examine your imaginary familys goals and the amount of savings required to meet each of them. Decide whether your family will be able to reach these goals. Give the groups 15 minutes for this. Then ask for volunteers to respond. What do you think about the possibility of your family achieving these goals? What will they have to do? Thank the groups for their ideas. Say: The first step in making a savings plan is to match our goals with our capacities to save. The following tips will be helpful: Post a flip chart with the following tips. Read or ask participants to read the tips.
Ask participants to examine their savings plans once more and make adjustments based on the previous discussion. Then ask the groups to present their plans one by one. They will present the original plan (prepared in Session 2) and the new plan, answering the following question: How did you change your savings plan and why?
61
Session 9
STEP 2
Match Savings Goals to the Best Savings Service
30
Say: Now that we have a realistic plan, the next step is to select the best saving product for each of our goals. We will do this on the basis of the field visits you made. Ask the participants to return to their imaginary case study groups and then say: Match the saving services that are available to your imaginary families using the information we learned in the visits to savings institutions. Distribute Handout 9.2: Selecting Savings Services Worksheet and review it with the group. Give the groups 20 minutes to fill it in. MINUTES
Savings Goals
Give participants the following instructions for reporting: Each group will give an example of a different savings goal and then report savings characteristics important for their imaginary family, the type of savings product and the institution that best responds to their goal. Ask 1 or 2 groups to share their work. 62
STEP 3
Prepare a Plan to Apply What You Have Learned
30
Say: You have learned many new things about savings by working on an imaginary family. It is time to consider how the lessons learned can be applied in your own family. What are the most important things you can do to improve savings in your own family? MINUTES
What are at least four steps you can take after this to improve savings in your own household? When they have finished, ask for 1 or 2 volunteers willing to share their plans. Congratulate the group for their terrific work during the savings training. Distribute Hand-out 9.3: Rules of Thumb for Savings for participants to take home. Ask for volunteers to sing their savings song one last time!
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Session 9
Encourage the group to mention as many ideas as they can think of. Then invite each one individually to prepare an action plan answering the following question:
HANDOUT 9.1
Savings Targets
12 MONTHS 1 2 3 4 5 6 7 8 9 10 11
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Savings Goals
Total Saved
HANDOUT 9.2
Selecting Savings Services
SAVINGS GOALS
WHAT ARE THE CHARACTERISTICS OF SAVINGS SERVICES WHICH TYPE OF MOST IMPORTANT SAVINGS TO THE FAMILY ACCOUNT BEST (ACCESS, DEPOSIT RESPONDS TO RULES, EASE OF USE, THEIR NEEDS? SAFETY, INTEREST, COST, ETC.)?
WHICH LOCAL FINANCIAL INSTITUTION OFFERS THE BEST TERMS, CONDITIONS AND OTHER FEATURES FOR THE FAMILY?
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Session 9
HANDOUT 9.3
Rules of Thumb for Savings
While basic principles of money management can apply to everyone, decisions to save or consume depend very much on your level of income, access to loans, and access to appropriate savings products. Nevertheless, there are a number of rules of thumb that you can use to guide decisions about savings and consumption: T Save as much as you can as soon as you can. The more you save, the better off youll be. T Save as you earn. T Try to save 10% of your income even if you dont have a specific purchase or investment for which you are saving. T Pay yourself firstput 10% of your earnings aside for savings before you do anything else. If you cant afford 10% right away, start with less, but save something. T Pay off your debts: Some people recommend paying down your debt before you start to save; others recommend saving even while paying down debt because it is important to begin building assets as soon as possible. This choice will depend on individual priorities, situation, and means. Total household debt should not exceed 36% of household income. T Calculate how your money can grow over time if you save regularly in an account that earns interest. T Dont carry a lot of cashavoid temptation to spend it! T Spend carefully. If you purchase big items, consider how much money you could make if you resell. Look for opportunities to save money by bulk buying of non-perishables. T Keep 3 to 6 months of living expenses in an emergency fund at all times. It can be used in case of job loss, unexpected illness, or to meet other emergency needs. An emergency fund will reduce your anxiety. T Find savings products that match your savings goals. T Keep emergency funds in a separate account. Open 2 savings accounts1 for emergencies that is easy to access and doesnt have any penalties for withdrawal, and 1 for savings for other goals that is harder to access (and therefore less tempting to withdraw the money). Keeping some savings out of reach is important. Good savings behavior requires discipline; discipline is learned through practice!
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CONTENT NOTE
there are many times when poor people need sums of money that are bigger than what they have in hand. The need for these usefully large lump sums arises from life cycle events such as birth, education, marriage and death, from emergency situations, and from the discovery of opportunities to make investments in assets or businesses. The only reliable and sustainable way they can obtain these sums is to build them, somehow or other, from their savings1 You can use savings to meet both expected and unexpected needs. They help to smooth cash flow, allow for optional expenditures, and invest in assets and businesses. In case of emergencies and crises, savings enable you to respond immediately and, over time, recover from related loss of income or property. Savings play a key role in meeting financial goals. These can include short-term goals (weeks or months) such as buying stock for a business or paying school fees; medium-term goals (13 years) such as home improvement expenses or a visit to the family; or long-term goals (over three years), such as to buy a house or save for retirement.
Rutherford, Stuart, The Poor and Their Money, Oxford University Press: New Delhi, India, 2000, p.1.
1
Microfinance Opportunities T Citi Foundation T Freedom from Hunger
Resources
Reasons to Save
Ways to Save
Managing money well begins with hanging on to what you have. This means avoiding unnecessary expenditure and then finding a safe place to store whatever money is left over. Making that choicethe choice to save rather than to consumeis the foundation of money management.2 You can choose to save through formal, semi-formal or informal institutions, and in the form of cash or non-cash. Non-cash forms of saving are assets, such as jewelry, consumer durables, or livestock that can quickly and easily be converted to cash and generally retain their value. Land is also an asset in which you can invest and hold your savings; it retains its value but is less liquid than livestock. Informal savings include saving cash at home, which keeps your cash very accessible and allows you to avoid the transaction costs associated with saving at formal savings institutions. This form of informal savings has two significant disadvantages: the temptation to spend the money and the risk of theft. You need strong discipline to both avoid spending these savings yourself and deny the pleas of other family members. Furthermore, money saved at home does not earn any interest, and thus may lose value over time. Saving in-kind (gold, livestock or land) is another form of informal savings. Semi-Formal savings encompass deposit collectors and group savings mechanisms, including rotating credit and savings associations (ROSCAs), village banks, solidarity groups and self-help groups. Familiar and simple, the group mechanism encourages discipline, scrutiny and support among members. The advantage of ROSCAs is that each member receives a lump sum of money at one time, with no loan or interest payments. However, a corresponding limitation is that members typically do not earn interest on money they have saved. Members of self-help groups borrow from their collective savings with the obligation to repay with interest, but they also receive periodic dividends. Limitations of group savings include instability of the groups, disagreements among members, and limited access to funds. Formal savings involve financial institutions, including banks, credit unions, cooperatives, post offices or microfinance institutions, and offer another widely used option for saving cash. Savings in these financial institutions are generally safe and earn interest. They offer a range of savings accounts tailored to different financial needs. However, the requirements for opening and maintaining an account such as minimum deposits, user fees, and
Rutherford, Stuart, The Poor and Their Money, Oxford University Press: New Delhi, India, 2000, p.2.
withdrawal requirements can be costly. These requirements are challenging if you make small, frequent deposits or withdrawals. Limited bank hours may make it difficult for you to access your money quickly in the case of emergency. Finally, where banks have failed, people tend to lack confidence in them.
Resources
Resources
Researchers have shown that many rules of thumb about life-cycle savings are as effective in optimizing the utility of those decisions as sophisticated financial models (Rodepeter and Winter, 1999).
References
Godfrey, Neale, S., and Carolina Edwards, Money Doesnt Grow on Trees. A parents guide to raising financially responsible children, Childrens Financial Network/Fireside, NY, 1994. Hirschland, Madeline, Guidelines for Developing Microsavings Services: A Desk Review for Freedom from Hunger, Report to Freedom from Hunger, CA, July 2000. Manje, Lemmy and Craig Churchill, The Demand for Risk-managing Financial Services in Low-income Communities: Evidence from Zambia, Working paper No. 33, n.d., ILO Social Finance Programme, <http://www.ilo.org/public/ english/employment/finance/download/wpap31.pdf>, (January 26, 2006). Mekong Economics, LTD. The Demand for Risk-Managing Financial Services from Poor Women in Rural Areas The Case of Vietnam, 23 December 2003. International Labor Organization. Final Report <http://www.microfinance.org.vn/he%20demand%20for%20risk%20managing%20financial%20 services%20from%20poor%20women%20_4_.pdf>, (January 26, 2006). Pohl, Avis, Less Debt, More Cash. Everywomans Money, Alpha Books, NY 2001. Rodepeter, Ralf and Joachim K. Winter. Rules of thumb in life cycle savings models. University of Manhiem, Germany (draft), October 1999. Rutherford, Stuart, The Poor and Their Money, Oxford University Press: New Delhi, India, 2000. Schiff, Lewis, Saving during lean times, The Armchair Millionaire Guide for Cutting Back (Web Letter) July 7, 2003, <http://money.cnn.com/2003/07/07/ pf/saving/armchair/>, (January 26, 2006).
Resources
Financial Education
A ROAD MAP FOR THE CURRICULUM
IMPLEMENTATION GUIDANCE
INTRODUCTION: THE RATIONALE FOR FINANCIAL EDUCATION MARKET RESEARCH GUIDANCE OUTCOMES GUIDANCE ADAPTATION GUIDANCE ADULT LEARNING PRINCIPLES AND CURRICULUM DESIGN FOR FINANCIAL EDUCATION
TRAINERS GUIDES
BUDGETING: Use Money Wisely Curriculum and Content Note SAVINGS: You Can Do It! Curriculum and Content Note DEBT MANAGEMENT: Handle with Care Curriculum and Content Note BANK SERVICES: Know Your Options Curriculum and Content Note FINANCIAL NEGOTIATIONS: Communicate with Confidence Curriculum and Content Note
Working Papers
MARKET RESEARCH FOR FINANCIAL EDUCATION ASSESSING THE OUTCOMES OF FINANCIAL EDUCATION