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Savings

YOU CAN DO IT!

Trainers Guide

Sections of this book may be reproduced, translated or adapted to meet local needs, provided they are distributed free or at cost and not for profit and provided that any changes maintain the integrity of the book. Please inform Microfinance Opportunities and/or Freedom from Hunger of plans to translate these materials into another language and provide each one copy of the publication. Please include the following statement on all section reproductions: 2005 Microfinance Opportunities. All rights reserved

Written permission from Microfinance Opportunities is required for any substantial changes.

For inquiries regarding rights, please contact: Microfinance Opportunities 1701 K Street NW, Suite 650 Washington DC 20006 USA Tel.: 202-721-0050 Fax: 202-721-0010 E-mail: info@mfopps.org www.MicrofinanceOpportunities.org

For other inquiries please contact either Microfinance Opportunities or Freedom from Hunger Freedom from Hunger 1644 DaVinci Court Davis, CA 95616 USA Tel.: 530-758-6200 Fax: 530-758-6241 E-mail: education@freefromhunger.org www.freefromhunger.org www.ffhresource.org

SAVINGS You Can Do It!


Trainers Guide

Financial Education for the Poor Project Washington, D.C. 2006

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

Savings: You Can Do It!


Introduction to Financial Education . . . . . . . . . . . . . . . . .i How to Use This Guide . . . . . . . . . . . . . . . . . . . . . . . . . . .v

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 FINANCIAL EDUCATION


WELCOME to Financial Education! With this trainers guide and the other four guides in the Financial Education for the Poor series, you can begin to promote basic financial literacy for those who want to learn how to manage their money. Before you start, however, lets ask and answer two key questions: What is financial education? Why is it important? The answers to these two questions contain good news and bad news about poor people and their money. While the poor share the same goals as all peopleeconomic security for themselves, their families, and future generationstheir limited resources and options often lead to a sense of hopelessness and inertia. Careful management of what little money they do have is critical to meet day-to-day needs, cope with unexpected emergencies, and take advantage of opportunities when they come along. The bad news is that the poor too often lack the knowledge and experience they need to be these careful money managers. This is the purpose of financial education. It teaches people concepts of money and how to manage it wisely. It offers the opportunity to learn basic skills related to earning, spending, budgeting, saving, and borrowing. The good news is that when people do become more informed financial decision-makers, they can plan for and realize their goals. Moreover, once people have acquired financial literacy skills, those skills cannot be taken away. A one-time course in financial education can have lifelong rewards. Financial education is relevant for anyone who makes decisions about money and finances. Women, in particular, often assume responsibility for household cash management in unstable circumstances and with few resources to draw on. Financial literacy can prepare them to anticipate life-cycle needs and deal with unexpected emergencies without assuming unnecessary debt. For youth, financial literacy can reduce their vulnerability to the many risks associated with the transition to adulthood, and enhance their skills in managing money as they enter the world of work. The Financial Education for the Poor Project, led by Microfinance Opportunities and Freedom from Hunger, has started with a focus on micro-entrepreneurs and clients of microfinance programs. For this group, financial education is more relevant now than ever before. Why? Many who seek credit and savings services have more choices than ever before. In many parts of the world, borrowers now can choose from a variety of informal lenders. In addition, microfinance institutions (MFIs) are beginning to offer a wider range of products and services i
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Introduction

SAVINGS: You Can Do It!

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

INTRODUCTION TO FINANCIAL EDUCATION

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

HOW TO USE THIS GUIDE

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.

The Content Note


The Content Note at the end of this guide provides a discussion of savings. Reading this short piece will give you a good idea about the content of the modulethe concepts that participants will learn and the skills they will practice. You will see that this moduleas well as others in the seriesis aimed at those with limited education and experience. Therefore, you dont need to be an expert on the topic in order to help others develop some very useful skills. So, if you are confused about something in the Content Note, dont be alarmed. Find someone to help you clarify the information. But if you find that the Content Note is very basic, dont be alarmed either. It is not, and does not need to be, a full textbook on the topic. The Content Note is background reading for trainers. But you should decide whether the participants in your training will benefit from reading it as well. Your decision will depend on their level of literacy and ease with written materials. You might consider having some photocopies on hand for those who want one.

The Learning Sessions


This module contains nine learning sessions. Each session takes between 35 minutes and 2 hours to complete. The Learning Sessions at a Glance on page 1 provides an overview to these nine sessions, listing the title and purpose of each one. However, with this and all the financial education modules, you should use your own judgment to decide which learning sessions are most relevant and useful for your clients. You can use one, two or all of them, depending on the experience participants have with the topic, or the time they are able to commit to training. Each session contains two to four learning activities that are described in step-by-step detail. These learning activities are based on the principles of

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Introduction

SAVINGS: You Can Do It!

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.

A Word About Adaptation


Because the learning sessions are spelled out in detail, you do not have to create anything from scratch. However, you will have to spend time preparing before the training begins, and its success depends on your work at this stage. When you have selected the learning sessions you want to facilitate, you will need to adapt each one. Read them carefully and take note of those details that must be changed in order to make the materials familiar to your participants. In the stories, you may need to change the names of the people and places to reflect your culture and geographic location. Take note of the types of businesses presented as examples. Are they familiar, common businesses in your area? Should you change them? Do you need to change the currency used in the exercises? In addition to these types of adjustments, you may find the opportunities to add activities to the module that are not in the guide. Field trips to relevant sites are a great way to expose participants to new experiences. Also, think about inviting professionals from the community who have expertise related to the topic at hand to speak to your group. In the event that the module needs significant re-working to fit your context, dont take on this job alone. See the Adaptation Guidance in Financial Education for the Poor: Implementation Guidance for direction on what needs to be a team effort.

Dont Leave the Learning Materials to the Last Minute!


Each learning session starts with a trainers information box that summarizes the session objectives, materials and activities. Review the list of materials well ahead of the actual training session. Please note Learning Session 8: Meet with Savings Service Providers requires you to first obtain brochures and product information from various local financial institutions and then arrange a field visit for participants with staff of these institutions. Session 9 refers back to plans made in Session 2 so one session shouldnt be used without the other. vi

HOW TO USE THIS GUIDE

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

SAVINGS: YOU CAN DO IT!

Learning Sessions at a Glance


The goal of this module is to help participants recognize the importance of savings, learn how and where to save, and to make a savings plan. The following table presents the learning sessions for the Savings Module and their purposes.

SESSION TITLE
1. Savings: What Are They and Why Save?

PURPOSE OF THE SESSION


T Define savings T Describe and categorize the purposes

of savings
T Identify how to overcome savings

difficulties 2. Set Savings Goals


T Set short- and long-term savings goals T Rank the importance of savings goals T Develop a savings plan for a family

3. Increase Your Savings

T Identify savings goals T Determine one familys capacity

to save
T Identify actions that family can take

to increase savings 4. Save for Emergencies


T List the types of emergencies and

their consequences
T Practice estimating the amount of

money needed for emergencies


T Describe how to cope with

emergencies by having an emergency fund


T Include emergencies as savings goals

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Introduction

SAVINGS: Youto Can Do It! Negotiations Introduction Financial

5. Decide How To Save

T List conditions that help people save successfully T Debate which conditions we can and cannot

control
T List ways to save more

6. Compare Savings Services

T Identify savings options T Distinguish between formal, semi-formal and

informal savings services


T Describe the advantages and disadvantages of

formal, semi-formal and informal services, including degree of risk


T Identify the features of savings services that will

influence their choice 7. Select Savings Products


T State the features of different savings accounts

offered by formal banks


T Match savings goals with specific savings products T Identify the appropriate uses of each type of

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

9. Make a Savings Plan

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

LEARNING SESSIONS AT A GLANCE

FEATURES OF THE LEARNING SESSIONS


Trainers Information Box
The box at the left hand side of page at the start of each learning session contains four elements. Objectiveslist of actions that the steps in the learning session are constructed to accomplish. Timethe estimated time needed to implement all of the steps designed for the learning session. Preparations/Materialslist of materials that the trainer must prepare before the activity can be presented. Flip charts are listed and incorporated into the step in which they occur. Their shaded borders easily identify the flip charts. Handouts needed for each activity are found at the end of the session. Stepsa list of activities needed to complete the learning session. The titles capture the process to be used and the content to be covered.

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

SAVINGS: You Can Do It!

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.

IMPORTANT PRINCIPLES TO REMEMBER


T Create a safe learning environment T Give feedback to the participants and praise them for their efforts T Think about ways of making the topic useful to all the participants present T Let the participants know that you are a learner with them T Use small groups (as suggested in the session guide). Small groups help

involve all participants, build a sense of teamwork and create safety


T Show respect by valuing the participants knowledge and experience with

the subject
T Be sure that throughout the session there is an opportunity for thinking,

acting and feeling

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

Savings: What Are They and Why Save

SAVINGS: You Can Do It!

Listen to a number of responses from the group. Then post the following flip chart and summarize their ideas as you review each point.

WHAT ARE SAVINGS?


T Money that is put away in the present for use in the future T Investments in jewelry, animals or land that can be sold when cash is needed T A way of building assets T A fundamental part of money management

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

SESSION 1: Savings: What Are They and Why Save

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.

Unexpected Future Events


T Sickness T Funerals T Emergencies T Theft

Expected Future Events


T Weddings T Education T Childbirth T Old Age T Holidays/

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

SAVINGS: You Can Do It!

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

SESSION 1: Savings: What Are They and Why Save

Share an example such as the one below.

Wife T Age 39 T Small restaurant

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

T Goals: increase size of business T Repair roof of house

SAVINGS: You Can Do It!

Write the answers on a flip chart. Acknowledge the barriers that participants have named.

BARRIERS TO SAVING MONEY

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:

TWO RULES OF SAVING


T Spend less than you earn! T Save something every day or week!

Explain that the sessions on savings will focus on learning how to confront some of the difficulties discussed today.

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SESSION 1: Savings: What Are They and Why Save

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

Set Savings Goals


OBJECTIVES
BY THE END OF THE LEARNING SESSION, PARTICIPANTS WILL HAVE: 1. Set short- and long-term savings goals 2. Ranked the importance of savings goals 3. Developed a savings plan for the family

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

Set Savings Goals

35

MINUTES

SAVINGS: You Can Do It!

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 GOALS AND PLANNING WORKSHEET


Lump Sum Needed Amount of Savings When Needed? Required per Week or Month In 6 months In 3 months $20/month $60/month Ranking of Importance

Savings Goal Short-term Education Fees Emergency Fund Long-term New Roof

$120 $180

$720

In 36 months

$20/month

Total Savings Required

$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

SESSION 2: Set Savings Goals

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
20
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

SAVINGS: You Can Do It!

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!

16

SESSION 2: Set Savings Goals

HANDOUT 2.1
Savings Goals and Planning Worksheet
AMOUNT OF SAVINGS RANKING OF REQUIRED PER IMPORTANCE WEEK OR MONTH

SAVINGS GOAL

LUMP SUM NEEDED

WHEN NEEDED?

Short-term

Long-term

Total Savings Required

17

Session 2

SESSION 3

Increase Your Savings


OBJECTIVES
BY THE END OF THE LEARNING SESSION, PARTICIPANTS WILL HAVE: 1. Identified savings goals 2. Determined one familys capacity to save 3. Identified actions that the family can take to increase savings

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

Step 1: 3.1: Marias Family T FLIP CHART PAPER T MARKERS

WHERE DO SAVINGS COME FROM?


T Setting aside a portion of income T Cutting costs (household expenditures, debt

STEPS
1. Explain how to save using a story 30 MINUTES 2. Reinforce the rules of saving with a song 15 MINUTES

payments, optional expenses)

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
Microfinance Opportunities T Citi Foundation T Freedom from Hunger

Session 3

TIME

SAVINGS: You Can Do It!

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.

20

SESSION 3: Increase Your Savings

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.

TWO RULES FOR SAVING


T Spend less than you earn! T Save something every day or week!

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

SAVINGS: You Can Do It!

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!)

22

SESSION 3: Increase Your Savings

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?

23

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

Save for Emergencies


STEP 1
List Emergencies and Their Consequences 15 MINUTES
Explain: One of the most important reasons to have savings is to pay for emergencies and other unexpected events. Let us brainstorm the types of emergencies and unexpected events that can occur at any time. Write the ideas on a flip chart. Then ask: What emergencies do you think will have the most severe financial consequences? Circle the emergencies that they mention. Choose no more than 5 or 6. Say: Get into the groups you have worked with to create an imaginary family. Discuss how to answer the following questions: What are the emergencies that your imaginary family is likely to face in a year? What will be the consequences for the family if they do occur? Give the groups 5 minutes to discuss these questions. While they are discussing, put up the blank flip chart with 2 columns labeled Type of 25
Microfinance Opportunities T Citi Foundation T Freedom from Hunger

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

SAVINGS: You Can Do It!

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:

26

SESSION 4: Save for Emergencies

Post the following on a flip chart.

HOW MUCH MONEY SHOULD YOU SAVE FOR EMERGENCIES?


Set aside at least 3 times your current average monthly income.

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.

MARIAS FAMILY EARNINGS


Month
January February March April May June July August September October November December Total

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

SAVINGS: You Can Do It!

Annual income $300

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,

preferably out of the house so it is not accessible. Open a bank account.


T Save different amounts each time

you earn some income.


T Make a schedule to pay off the most

expensive debts first.

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

SESSION 4: Save for Emergencies

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

Please discuss how to answer the following question:

SESSION 5

Decide How to Save


OBJECTIVES
BY THE END OF THE LEARNING SESSION, PARTICIPANTS WILL HAVE: 1. Listed conditions that help people save successfully 2. Debated which conditions we can and cannot control 3. Listed ways to save more

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

SAVINGS: You Can Do It!

INTERNAL/EXTERNAL FACTORS INFLUENCING SAVINGS


T A safe place to keep savings T A good savings plan T Discipline T Family support for the decision to save T Motivation to meet personal goals: house, marriage, education, etc. T A convenient place to save (close to home, easy to get to, etc.) T Interest on savings T Desire to resist temptation to spend money on luxury items T Size of allowable deposits fits ability to save T Willingness to reduce expenses T Ability or opportunity to earn more income

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

SESSION 5: Decide How to Save

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

Compare Savings Services


STEP 1
Identify Savings Vehicles that are Available to People in this 25 MINUTES Community
Ask the participants the following: What are the ways people save in your community? Probe for all the ways people save, from home to banks. Write their answers on a flip chart or summarize them orally. Explain the following: There are many vehicles for savings, both formal and informal. A formal savings institution is regulated by a government agency to ensure the safety of savings. Usually, formal savings services pay interest on savings. And some institutions insure savings. That is, if the institution loses your money, the government will reimburse you for your losses up to a certain amount. Semi-formal savings methods fall in the middle between the formal and informal. Semi-formal savings institutions offer organized services but are not supervised or regulated by the government. They include savings collectors, village banks and other microfinance-group mechanisms. 35
Microfinance Opportunities T Citi Foundation T Freedom from Hunger

TIME
70 MINUTES

PREPARATIONS/MATERIALS T 1520 BLANK CARDS T FLIP CHARTS FOR USE IN


FOLLOWING STEPS: Step 1: Flip chart with 3 blank columns labeled Formal, Semi-formal and Informal Step 2: Flip chart with 4 blank columns labeled Savings Services, Advantages, Disadvantages and Risk Rating Step 4: Blank flip chart with title Characteristics to Consider When Choosing a Savings Service T FLIP CHART PAPER T MARKERS T MASKING TAPE

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

SAVINGS: You Can Do It!

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,

credit associations, village banks, solidarity groups, self-help groups


T Savings Collector T Non-Regulated MFI or

livestock, land, etc.)


T Other

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

SESSION 6: Compare Savings Services

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: You Can Do It!

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

SESSION 6: Compare Savings Services

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

SAVINGS: You Can Do It!

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.

CHARACTERISTICS TO CONSIDER WHEN CHOOSING A SAVINGS SERVICE


T Access T Convenience and ease of use T Opening deposit requirements T Safety T Interest earned on savings

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

Select Savings Products


STEP 1
Match Savings Products to Savings Goals 10 MINUTES
Say: Now we are going to talk about the different types of savings products that are available and match the products to different savings goals. To do this, let us remember some of the things we learned in previous sessions. First, let us review the features of savings services that are important. They include the following: T Access T Convenience and ease of use T Opening deposit requirements T Safety T Interest earned on savings Then say: Let us also remember the difference between short-term and long-term savings goals.

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

SAVINGS: You Can Do It!

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

SESSION 7: Select Savings Products

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.

FORMAL INSTITUTION SAVINGS PRODUCTS


Type of Savings Product 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. T For expected needs.

Regular or Passbook T Voluntary timing and amount Savings of deposits. T Flexible withdrawals. T May or may not pay interest.

Contractual Savings (Also known as accumulated deposit, fixed-term account)

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

SAVINGS: You Can Do It!

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

SESSION 7: Select Savings Products

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

SAVINGS: You Can Do It!

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

SESSION 7: Select Savings Products

HANDOUT 7.1
Formal Institution Savings Products

TYPE OF SAVINGS PRODUCT

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

Meet With the Providers of Savings Services

SAVINGS: You Can Do It!

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

Important Conditions for Saving

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

SESSION 8: Meet With the Providers of Savings Services

Important Conditions for Saving


Access to Savings/Flexibility of Withdrawal Requirements for Opening Deposit Account Safety Interest Earned on Savings Cost of Savings Liquidity Convenience, Ease of Use

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.

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Session 8

SAVINGS: You Can Do It!

QUESTIONS TO ASK AT THE BANK


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?

Requirements for Opening Deposit Account Convenience, Ease of Use

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?

Interest Earned on Savings

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?)

Cost of Savings Liquidity

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

SESSION 8: Meet With the Providers of Savings Services

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

SAVINGS: You Can Do It!

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

SESSION 8: Meet With the Providers of Savings Services

HANDOUT 8.1
Questions to Ask at the Bank

QUESTIONS TO ASK

Access to Savings/Flexibility of Withdrawal

Opening Deposit Requirements

Convenience/Ease of Use

Safety

Interest Earned on Savings

Cost of Savings

Liquidity

55

Session 8

IMPORTANT CONDITIONS FOR SAVING

SAVINGS: You Can Do It!

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?

Opening Deposit Requirements

How much savings is required? What documentation do I need?

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?

Interest Earned on Savings

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?)

Cost of Savings Liquidity

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

SESSION 8: Meet with the Providers of Savings Services

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

Opening Deposit Requirements

Ease of Use of Services

Safety

Interest Earned on Savings

Cost of Savings

Liquidity

57

Session 8

SESSION 9

Make a Savings Plan


OBJECTIVES
BY THE END OF THE LEARNING SESSION, PARTICIPANTS WILL HAVE: 1. Practiced making a savings plan 2. Selected savings services that best match a familys goals 3. Completed an action plan for increasing their own savings

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

SAVINGS: You Can Do It!

Example:

SAVINGS GOALS AND PLANNING WORKSHEET


Amount of Savings Required per Ranking of Week or Importance Month
$20/month $60/month

Savings Goal
Short-term Education Fees Emergency Fund Long-term New Roof Total Savings Required

Lump Sum Needed


$120 $180

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

Total Monthly 100 100 100 Savings Goal Total Saved

60

SESSION 9: Make a Savings Plan

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.

TIPS FOR SAVING


T Look for new ways to save on expenses T Look for new ways to increase income T Look for new ways to save part of your income regularly T Examine whether you can meet a goal for less money T Prioritize your goalsperhaps you can put off one goal to realize another one

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

SAVINGS: You Can Do It!

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

SELECTING SAVINGS SERVICES


What are the characteristics of savings services most important to the family (access, deposit rules, ease of use, safety, interest, cost, etc.)? Which local financial institution offers the best terms, conditions and other features for the family?

Savings Goals

Which type of savings account best responds to their needs?

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

SESSION 9: Make a Savings Plan

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!

63

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:

SAVINGS: You Can Do It!

HANDOUT 9.1
Savings Targets
12 MONTHS 1 2 3 4 5 6 7 8 9 10 11

64

Savings Goals

Total Saved

SESSION 9: Make a Savings Plan

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?

65

Session 9

SAVINGS: You Can Do It!

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!

66

CONTENT NOTE

Savings: You Can Do It!


Definition of Saving
Savings is money put aside by an individual or household for use in the future. A key to good money management, savings help individuals and households manage risk, deal with emergencies, smooth income, build assets, and meet financial goals. People save by putting money aside when it comes in and by spending less when it goes out.

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

SAVINGS: You Can Do It!

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.

RESOURCE MATERIALS: Content Note

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.

Savings Options at Formal Financial Institutions


Formal financial institutions offer a wide variety of savings products. Regular or passbook savings is the most widely used type of account for regular transactions because the timing and amount of deposits and withdrawals are flexible. Typically, you are allowed a set number of free transactions each month, and will be charged a fee for any additional ones. In exchange for the right to make frequent transactions, the bank pays very low interest on passbook savings accounts. Account transactions are tracked through a passbook, and a minimum deposit is usually required in order to open the account. This account is appropriate when you need to make regular deposits and withdrawals, and require easy access to your savings. Contractual savings are an alternative form of savings that require you to deposit a fixed amount on a regular basis over a pre-determined period of time. Although contractual savings can be structured in many ways, access to savings often is restricted until the contract is fulfilled, and you will be charged a penalty for withdrawing your funds early. This type of account will be useful if you have a regular source of income that enables you to meet a commitment to save at regular intervals for future goals. Time deposits require a fixed sum to be deposited for a pre-determined amount of time and interest rate. They are not accessible during this period of time, but generally yield a higher interest rate than regular or contractual savings. You may be interested in this account if you receive a lump sum of money that you do not need immediately. To save for a future goal and earn maximum interest, you can use this account to place that money out of reach for a pre-determined amount of time. You choose how long that period will be based on your estimation of when you might need the money. Time deposits vary from six months to five years, and typically, the longer the time period you choose, the higher the interest rate will be.

Resources

SAVINGS: You Can Do It!

Important Factors for Deciding Where to Save


When deciding where to save, you should consider the following: T Deposit requirements for the savings account. Is there a minimum deposit required to open the account? Is there a minimum balance required to keep the account open? Are small deposits accepted? Can variable sums be deposited? Can deposits be made frequently? What paperwork is required? T Terms of use. Is the saving program compulsory or voluntary? Do you have to commit to saving a set amount at regular intervals or over a certain time period? Are there rules about how much you must deposit and when? Are there rules about how much you are allowed to withdraw and when? Can you withdraw the money at any time without penalty? T Cost. What fees are charged for deposits, withdrawals, or passbooks? Some forms of saving may lose value during times of inflation or economic instability. You need to consider such costs even though they do not involve payment of actual fees. T Access/Ease of use. Is the account convenient? What are the institutions hours of operation? Is it open at convenient times? How far is the institution from your home or workplace? Are transactions quick and confidential? What is the quality of customer service? Is the atmosphere comfortable and friendly? Are there long lines at the teller windows? Is information on the account easily available? Does it provide statements? Are they easy to understand? Are the application procedures easy to follow? Does it have an ATM network? T Safety. What is the reputation of the institution? Does it have insurance or other guarantees to safeguard funds? Are the telephone or electronic transactions safe? Is the bank or its branch located in a safe neighborhood location? T Liquidity. 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? T Interest. Will your savings earn interest? If so, how much? How and when is the interest paid? What is the difference in interest rates earned across different types of savings products or plans?

RESOURCE MATERIALS: Content Note

How to Make a Savings Plan


A savings plan is a critical tool for managing money to meet short-, medium-, or long-term financial goals. To make a savings plan, follow the steps outlined below: 1. Set savings goals. 2. Figure out how much you need to save over what period of time to meet your savings goals. Set a savings target. 3. Figure out how much you are earning over this period of time, the regularity (or irregularity) of your earnings, and how much you can expect to save on a regular basis. 4. Identify which expense you can cut back (for example, video rental, cigarettes, or tea breaks) and reallocate this amount to your savings. 5. Decide where you will save. Identify places to save, available savings products, and their pros and cons. 6. Plan how much and how often you will save. For example, you could put a specified amount aside in an envelope when you are paid or at the end of each business day and keep it in a safe place until you are able to take it to the bank. Go to the bank on a set day of the week or month. If you are a wage earner and your employer is linked to a bank, consider a deduction from your paycheck that is automatically deposited into your savings account. 7. Keep track of your savings. Monitor progress towards your savings target on a regular basis by checking the amount you have saved and how close you are to your goal. Check bank statements, passbooks, or other sources of information on your savings.

Resources

SAVINGS: You Can Do It!

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, access to appropriate savings products, and personal discipline. Nevertheless, there are a number of rules of thumb that you can use to guide decisions about savings and consumption.3 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 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 you could resell them for. Look for opportunities to save money by bulk buying of nonperishables. 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 Keep three to six months of living expenses in an emergency fund at all times. It can be used in case of job loss, unexpected illness, and to meet other emergency needs. An emergency fund will reduce your anxiety. T Keep emergency funds in a separate account. Open two savings accounts one for emergencies that is easy to access and doesnt have any penalties for withdrawal, and one 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. T Find savings products that match your savings goals. Good savings behavior requires discipline; discipline is learned through practice!

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).

RESOURCE MATERIALS: Content Note

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

TRAINING OF TRAINERS MANUALS


BUDGETING: Use Money Wisely TOT Manual and Toolkit SAVINGS: You Can Do It! TOT Manual and Toolkit DEBT MANAGEMENT: Handle with Care TOT Manual and Toolkit BANK SERVICES: Know Your Options TOT Manual and Toolkit FINANCIAL NEGOTIATIONS: Communicate with Confidence TOT Manual and Toolkit

Working Papers
MARKET RESEARCH FOR FINANCIAL EDUCATION ASSESSING THE OUTCOMES OF FINANCIAL EDUCATION