ASK Dr. NOET
Loose change and your saving habits
By Dr. Johnny Noet Ravalo
INQUIRER.net
First Posted 17:52:00 07/23/2008
What do you do with loose change you acquire everyday? Do you drop them into canisters and forget about them? Do you count if you got the right amount in the first place? Do you leave them as a tip, finding them to be too much of a nuisance?
There are a lot of things that loose change in your hands – or lying somewhere around the house – can say about you and your saving habits.
Let me go back to Al of the Tale of Two Drivers that I wrote about months ago. Al’s salary is 40 percent higher than the other driver but he had no savings. Today, he still doesn’t save.
Al has the bad habit of being a “non-counter”. He doesn’t check if he got the right amount of change. It is not unusual for Al to be one paper bill short in change (he has been short P1,000, P500, P100, P50 and P20 ... at least he is that consistent). At the same time, Al has no qualms giving a would-be watch-your-car guy P30 even if parking has already been paid for at the car park entrance and the P30 is not even his money but the loose change of his employer.
Non-counters like Al often do not have any saving. Al takes a laid back, fatalistic perspective and is prone to dismiss his situation as part of the difficult times. What I find different about Al and other non-counters is that they often don’t have the urge to do something about their cash flows.
This is not about a lack of income since Al gets almost P170,000 a year. It is about a lack of perspective in handling his money. Al prefers to buy all the food he and his family consume daily. The family has a refrigerator but don’t cook. Al turned down an offer from his employer to pay for his son’s school expenses at a better school. As far as Al is concerned, he can easily afford the P350 a quarter he is presently paying, never mind if the teachers don’t show up. In his mind, moving his son to a P9,000 a year school makes no difference because the boy learns to read and write anyway.
Some non-counters are also “coin huggers”. Once they get their hands on coins, they will instinctively set them aside ... somewhere. The coins are left to pile up. They are merely part of normal transactions.
Coin hoggers are sensitive to form and scale. A crisp P100 bill is not the same as 20 pieces of P5 coins. They prefer P100 bills and their disinterest with coins can often be explained by their having more than sufficient income.
Coin hoggers are more of investors than savers. Instead of having 30-day time deposits, they most likely will go for higher yield-higher balance-longer tenor instruments. At the highest end of the income spectrum, coin hoggers simply skip the coins altogether and they become “coin avoiders.” Their saving simply would neither be defined nor affected by the tiny detail the rest of us refer to as coins.
Then there are “transactors.” These are people who set aside coins and count them. In most cases, transactors not only build value with their coins but also actively use them.
Most of us started out as transactors when we filled up our alkansiya. We derived great pleasure in taking stock of the weight of our alkansiya because it was the defining moment of building value. We didn’t want to break the alkansiya and instead just kept on feeding it more coins.
Transactors are patient savers who do not mind taking small steps in creating value. Today, the fancy term is emotional quotient but back then it was just plain patience. Among family and friends who kept their alkansiya growing up, I find them today to be conscientious savers. There is no need for them to learn of newer techniques of saving; they simply make the effort to set aside and keep going and going and going.
This is not a distinction between rich or poor. Non-counters may be ultra-rich while some transactors may not. What we are talking about here is the saving habit and how our attitude towards the small stuff can affect what we do with the bigger stuff, if ever we get there.
Saving does not guarantee that we will always have enough when we need the added purchasing power. By not saving though, we consign ourselves to the world of Al.
Al looks, behaves and is actually content. It is only when his children get sick, when added school expenses come up or when his mother wants to go to the province does he realize that he has no saving and must borrow again. If you borrow from Al, more likely he will actually produce some cash from somewhere. This is why it all boils down to perspective because his income does give him the notional capacity to save.
Do you know how many loose coins you have floating around at home?
(Have a question for Dr. Noet? Email personal_finance@inquirer.net.
(Noet Ravalo is a macro-financial economist by practice and profession. He was chief economist of the Bankers Association of the Philippines until 2002 and has since been doing consulting work. Since 1994, he has been asked to provide technical inputs to both the Senate and the House of Representatives on various economic and financial legislation, some of which will have big impact on Filipinos' personal finances.)
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