Recession and Savings: Five better ways to preserve savings in a recession

Proshare

Monday, October 03, 2016 3.38 PM / Taiwo Ologbon-Ori 

In the midst of economic adversity, wealth would be made and lost. Whichever happens, cash would play a dominant role - this makes cash remain “king” during recession. As an investor or income earner, you must understand the importance of cash and the need to preserve same during recession and in an high inflationary environment. While recession provides emerging opportunities, you must first focus on how to protect and preserve your cash via money markets, treasury bills and other commodities trading

The recent state of the economy has made so many income earners embrace cautious spending and low expenses effortlessly with the primary aim to free up more cash for savings.

During recession, where there would be shortage of resources and opportunities across board, that is, low wages, shrinking employment and business, there is need for everyone to take another fresh look at his or her balance sheet for proper balance sheet repair.

How do you achieve balance sheet repair? You start with paying down your debt very fast, freeing up more cash and putting money in the right (assets) column in your balance sheet.

The energy channelled towards savings need to be redirected towards investment or special savings accounts with higher interest now. However, you may not find this with Nigerian banks except fixed deposit accounts. Ordinary savings into bank accounts during the recession makes less sense particularly in an uncertain economy like ours - Nigeria.

Apart from weak or dwindled savings during recession due to lack of means, inflation has grown extra intestines to eat up the value of your savings faster than you can imagine.

Recently, I closed one of my daughter’s savings account and moved all the cash into a short term fixed-income savings-investment account. The meagre accrued interest received triggered the decision when I compared same with the current inflation rate of 17%+. The purpose of this article is not to discourage savings out rightly but to teach some better ways of saving during recession as listed below.

1.       You can convert your Naira to dollar as a way of saving- saving your money in dollar currency may sound unpatriotic, but that is what all wise men are doing including your boss and government.

2.      You can also buy into high yield government bonds or treasury bills as a way of protecting the value of your cash in savings.

3.      You can invest in some annuity schemes and Fixed-income mutual funds, these investments vehicles retain value with potential to offset/ reduce effect of inflation. It is important you check the track records of these investment vehicles. You may need to reject newly introduced investment products during recession unless the company or fund manager is reliable based on track records. Do not buy into stock-based investment or mutual funds.

4.      You can also approach your bank to seek counsel on how you can do special long term savings. This attracts special interest and returns on your idle cash. Leaving cash idle in your kid's savings account make less or no sense during recession.

5.      Another traditional way of preserving value of money is to heavily buy expensive gold jewries and landed properties in fast developing areas, like Ikorodu and Lekki-EPE axis- This makes sense but the main problem of converting this to instant cash during time of need could be discouraging.

While we would appreciate your feedbacks, we would also like to encourage you to share your experience with us on your survival moves, options taken and what more you would like to know.

Kindly send in your personal stories, views and comments to market@proshareng.com and securities@proshareng.com

 

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