Savings Trainer's Guide

SavingsYOU CAN DO IT!

Trainer’sGuide

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For other inquiries please contact eitherMicrofinance Opportunities or Freedom from Hunger

Freedom from Hunger1644 DaVinci CourtDavis, CA 95616 USATel.: 530-758-6200Fax: 530-758-6241E-mail: education@freefromhunger.orgwww.freefromhunger.orgwww.ffhresource.org

SAVINGSYou Can Do It!

Trainer’s Guide

Financial Education for the Poor Project

Washington, D.C.

2006

PREFACE

Savings Trainer’s 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 Centrein Poland in collaboration with their partners which also pilot testedthe modules. These learning sessions provided the basis for the firstgeneric set of savings learning sessions created by Kathleen Stack ofFreedom from Hunger. The generic learning sessions were reviewed byFinancial Education for the Poor partner organizations. Candace Nelsoncreated the final version of the savings learning sessions with inputfrom Kathleen Stack and Monique Cohen. The Content Note waswritten by Jennefer Sebstad and edited by Candace Nelson. StaceySechrest of Citi and Leslie Meek of Citi Foundation reviewed the finaldocument.

MICROFINANCE OPPORTUNITIES

Microfinance Opportunities was established in 2002 as a microenterpriseresource center that promotes client-led microfinance. It seeks to help poorpeople increase their access to well-designed and delivered financial services.Microfinance Opportunities provides action-research, training and technicalassistance 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, internationaldevelopment organization bringing innovative and sustainable self-helpsolutions to the fight against chronic hunger and poverty. Freedom fromHunger specializes in ensuring that the poor have access to microfinanceand health protection services, and life skills training to achieve foodsecurity for their families.

CITI FOUNDATION

The Citi Foundation, which makes grants in more than 85 countries aroundthe 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.

The idea to develop a financial education curriculum for the poor grew out of adinner-table conversation with Jayshree Vyas, the managing director of SEWA Bank.She argued, quite correctly, that financial literacy is critical for improving money-management skills and promoting asset-building for the poor. When the idea was firstproposed to Citi Foundation in 2002, financial education for microfinance clients wasnew and different.

Aside from SEWA Bank, few, if any, institutions in developing countries had venturedinto financial education. On the face of it, a major program to promote financialliteracy in poor countries looked like a challenging venture, both for MicrofinanceOpportunities and for Citi Foundation. Freedom from Hunger had worked with SEWAon its financial literacy training program and was invited to become a major partnerin 2003. Since then, there has been an outpouring of interest from microfinancepractitioners who want to join the program. While many wondered out loud why ithad taken the microfinance industry so long to recognize the importance of financialeducation, they immediately saw it as a “win-win” for both microfinance institutionsand their clients.

First and foremost we would like to thank Citi Foundation for investing in thisprogram. Chip Raymond, the former President of the Foundation, and Leslie Meek,our Program Officer, took a double risk, embarking on a new area of microfinanceand supporting a start-up organization, Microfinance Opportunities. They have beensuperior partners in their strong support for this work. Subsequently others from Citihave joined us in our work. They include Stacey Sechrest of Citi’s Office of FinancialEducation and Amy Feldman of Citi Foundation and they have provided valuable inputsas we have moved towards finalizing the curriculum.

We want to express our appreciation to the partner organizations and their clients whomade the development of this curriculum possible. They are Al Amana (Morocco), CARDBank (Philippines), Equity Building Society (Kenya), the Microfinance Centre (Poland),Pro Mujer (Bolivia), SEWA Bank (India) and Teba Bank (South Africa). Over the threeyears of this project, they have worked diligently in conducting market research, aswell as developing and testing training modules.

We owe a huge debt of thanks to Candace Nelson for her technical and editorialcontributions. It is also timely to express our appreciation of members of our staff whohave provided us with the support to get the work done. They include Tracy Gerstle,Diana Tasnadi, Danielle Hopkins and Liz McGuinness of Microfinance Opportunities, andChristopher Dunford, Rossana Ramirez, Ellen Vor der Bruegge, Marc Bavois, JoanDickey, Julie Uejio, Bobbi Gray and Wava Haggard of Freedom from Hunger.

Monique Cohen Jennefer Sebstad, Consultant Kathleen StackMicrofinance Opportunities Microfinance Opportunities Freedom from Hunger

December 2005

ACKNOWLEDGEMENTS

Introduction to Financial Education . . . . . . . . . . . . . . . . .i

How to Use This Guide . . . . . . . . . . . . . . . . . . . . . . . . . . .v

TRAINER’S 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

Savings:You Can Do It!

TABLE OF CONTENTS

WELCOME to Financial Education! With this trainer’s guide and the other fourguides in the Financial Education for the Poor series, you can begin to promotebasic financial literacy for those who want to learn how to manage their money.

Before you start, however, let’s 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 aboutpoor people and their money. While the poor share the same goals as allpeople—economic security for themselves, their families, and futuregenerations—their limited resources and options often lead to a sense ofhopelessness and inertia. Careful management of what little money they dohave is critical to meet day-to-day needs, cope with unexpected emergencies,and take advantage of opportunities when they come along. The bad news isthat the poor too often lack the knowledge and experience they need to bethese careful money managers.

This is the purpose of financial education. It teaches people concepts of moneyand how to manage it wisely. It offers the opportunity to learn basic skillsrelated to earning, spending, budgeting, saving, and borrowing. The good newsis that when people do become more informed financial decision-makers, theycan plan for and realize their goals. Moreover, once people have acquiredfinancial literacy skills, those skills cannot be taken away. A one-time course infinancial education can have lifelong rewards.

Financial education is relevant for anyone who makes decisions about moneyand finances. Women, in particular, often assume responsibility for householdcash management in unstable circumstances and with few resources to draw on.Financial literacy can prepare them to anticipate life-cycle needs and deal withunexpected emergencies without assuming unnecessary debt. For youth,financial literacy can reduce their vulnerability to the many risks associatedwith the transition to adulthood, and enhance their skills in managing moneyas they enter the world of work.

The Financial Education for the Poor Project, led by Microfinance Opportunitiesand Freedom from Hunger, has started with a focus on micro-entrepreneurs andclients of microfinance programs. For this group, financial education is morerelevant now than ever before. Why? Many who seek credit and savings serviceshave more choices than ever before. In many parts of the world, borrowers nowcan choose from a variety of informal lenders. In addition, microfinanceinstitutions (MFIs) are beginning to offer a wider range of products and services

INTRODUCTION TOFINANCIAL EDUCATION

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Microfinance Opportunities � Citi Foundation � Freedom from Hunger

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 understandthese new options and may not use them to their advantage. To date, MFIs’promotion of their new products has not always included careful explanationand education about their features. To weigh alternatives and select theproducts most appropriate for their needs, clients need to understand howtheir features differ, how to calculate and compare their costs, and how todetermine what they can afford.

By focusing on informed and strategic decision-making, the Financial Educationfor the Poor Project goes beyond providing information. Its goal is tostrengthen those behaviors that lead to increased saving, more prudentspending and borrowing for sound reasons. To achieve sustained behaviorchange, the curriculum is based on a learner-centered approach, capturing howadults learn best. It builds on what adult learners already know, makes the newcontent relevant to their lives, and provides the opportunity to practice thenew skills.

The Financial Education for the Poor Project developed five training modulesover a three-year period spanning 2003 to 2005. Seven partners around theglobe actively participated in the project, starting with market research in theircountries to identify the priority topics, learning objectives and trainingmethods, and culminating with curriculum design and testing. Theparticipating 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). Theircommitment to this process has ensured that the financial educationcurriculum responds to the real needs of poor clients.

This curriculum consists of five modules on five distinct topics.They are as follows:

� Budgeting: Use Money Wisely

� Savings: You Can Do It!

� Debt Management: Handle With Care

� Bank Services: Know Your Options

� Financial Negotiations: Communicate With Confidence

For each module, the curriculum offers:

� a content note that provides basic discussion of the topic;

� a trainer’s guide with detailed instructions for the conduct of eachlearning session in the module; and

� a training of trainers manual to prepare those who will conductthe training.

SAVINGS: You Can Do It!

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You can choose to use these modules in any number and order that fits yourtraining needs. You may only be interested in one or two of the topicscovered by these modules; alternatively, you may want to start withbudgeting and proceed through all of them. Because each module consists ofmultiple learning sessions that start with basic information and progress tomore complex aspects of the topic, you can choose only those learningsessions within each module that address your specific needs. The nextsection, “How to Use This Guide,” provides more guidance onthese options.

Turn the page. Read on. The content notes and the Learning Sessions at aGlance section will give you a good idea of the content, while the step-by-stepinstructions for the trainer capture the participatory, learner-centered activitiesthat make this training in financial education both fun and effective.

INTRODUCTION TO FINANCIAL EDUCATION

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Savings: You Can Do It! is a complete training course to help people learn thebenefits of savings and how to save. It contains both background informationto orient you, the trainer, to the topic and step-by-step descriptions of learningactivities 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 themodule—the concepts that participants will learn and the skills they willpractice. You will see that this module—as well as others in the series—isaimed at those with limited education and experience. Therefore, you don’tneed to be an expert on the topic in order to help others develop some veryuseful skills. So, if you are confused about something in the Content Note,don’t be alarmed. Find someone to help you clarify the information. But if youfind that the Content Note is very basic, don’t be alarmed either. It is not, anddoes not need to be, a full textbook on the topic.

The Content Note is background reading for trainers. But you should decidewhether the participants in your training will benefit from reading it as well.Your decision will depend on their level of literacy and ease with writtenmaterials. You might consider having some photocopies on hand for those whowant one.

The Learning Sessions

This module contains nine learning sessions. Each session takes between 35minutes and 2 hours to complete. The “Learning Sessions at a Glance” on page1 provides an overview to these nine sessions, listing the title and purpose ofeach one. However, with this and all the financial education modules, youshould use your own judgment to decide which learning sessions are mostrelevant 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 theyare able to commit to training.

Each session contains two to four learning activities that are described instep-by-step detail. These learning activities are based on the principles of

HOW TO USE THIS GUIDE

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adult learning (see the Adult Learning Principles and Curriculum Design forFinancial Education). They include stories, exercises, small-group discussionsand role-plays which actively engage the participants in the learning process.They also promote teamwork and learning from peers. As you read the step-by-step instructions, give yourself permission to imagine a training session that isactive, sometimes noisy, and fun. As the trainer, you will not be doing all thetalking. 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 tocreate anything from scratch. However, you will have to spend time preparingbefore 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 willneed to adapt each one. Read them carefully and take note of those detailsthat must be changed in order to make the materials familiar to yourparticipants. In the stories, you may need to change the names of thepeople and places to reflect your culture and geographic location. Take noteof the types of businesses presented as examples. Are they familiar, commonbusinesses in your area? Should you change them? Do you need to changethe currency used in the exercises?

In addition to these types of adjustments, you may find the opportunities toadd activities to the module that are not in the guide. Field trips to relevantsites are a great way to expose participants to new experiences. Also, thinkabout inviting professionals from the community who have expertise related tothe topic at hand to speak to your group.

In the event that the module needs significant re-working to fit your context,don’t take on this job alone. See the “Adaptation Guidance” in FinancialEducation for the Poor: Implementation Guidance for direction on what needs tobe a team effort.

Don’t Leave the Learning Materials to theLast Minute!

Each learning session starts with a “trainer’s information box” that summarizesthe session objectives, materials and activities. Review the list of materials wellahead of the actual training session. Please note “Learning Session 8: Meet withSavings Service Providers” requires you to first obtain brochures and productinformation from various local financial institutions and then arrange a fieldvisit for participants with staff of these institutions. Session 9 refers back toplans made in Session 2 so one session shouldn’t be used without the other.


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Most sessions require flip-chart paper, markers and tape. You will use thesematerials to record important points of participants’ discussions. As you filleach sheet of paper with their responses, you should tape it to a wall fordisplay and reference.

However, many items on the materials list will require that you prepare chartsor checklists. All of these are provided for you in the guide, but you will needto re-create them in a large format that everyone can see. Most often thisinvolves re-drawing the chart or table or form on a large piece of paper such asa flip chart or even inexpensive brown wrapping paper. Some sessions call forcards 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 beforethe session.

Handouts mentioned in the step-by-step instructions are located at the end ofeach session. They should be photocopied and distributed to participants at theappropriate time.

Don’t underestimate the time you will need to prepare. You don’t want to becaught 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 theprocess.

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

Learning Sessions at a Glance

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SESSION TITLE PURPOSE OF THE SESSION


1. Savings: What Are They andWhy Save?

� Define savings

� Describe and categorize the purposesof savings

� Identify how to overcome savingsdifficulties

2. Set Savings Goals � Set short- and long-term savings goals

� Rank the importance of savings goals

� Develop a savings plan for a family

3. Increase Your Savings � Identify savings goals

� Determine one family’s capacityto save

� Identify actions that family can taketo increase savings

4. Save for Emergencies � List the types of emergencies andtheir consequences

� Practice estimating the amount ofmoney needed for emergencies

� Describe how to cope withemergencies by having anemergency fund

� Include emergencies as savings goals

Introduction to Financial NegotiationsSAVINGS: You Can Do It!

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5. Decide How ToSave

� List conditions that help people save successfully

� Debate which conditions we can and cannotcontrol

� List ways to save more

6. Compare SavingsServices

� Identify savings options

� Distinguish between formal, semi-formal andinformal savings services

� Describe the advantages and disadvantages offormal, semi-formal and informal services,including degree of risk

� Identify the features of savings services that willinfluence their choice

7. Select SavingsProducts

� State the features of different savings accountsoffered by formal banks

� Match savings goals with specific savings products

� Identify the appropriate uses of each type ofsavings account

8. Meet with theProviders of SavingsServices

� Identify financial institutions in the area

� Identify the key features of savings products thatinfluence which ones are chosen

� Develop a list of questions to ask to learn aboutthese features

� Conduct an interview with bank employees

� Process information gathered at the bank

9. Make a SavingsPlan

� Practice making a savings plan

� Select the savings services that best match afamily’s goals

� Complete action plan for increasing theirown savings

LEARNING SESSIONS AT A GLANCE

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FEATURES OF THE LEARNING SESSIONS

Trainer’s Information Box

The box at the left hand side of page at the start of each learning sessioncontains four elements.

Objectives—list of actions that the steps in the learning session areconstructed to accomplish.

Time—the estimated time needed to implement all of the stepsdesigned for the learning session.

Preparations/Materials—list of materials that the trainer mustprepare before the activity can be presented.

Flip charts are listed and incorporated into the step in which theyoccur. Their shaded borders easily identify the flip charts.

Handouts needed for each activity are found at the end of thesession.

Steps—a list of activities needed to complete the learning session.The titles capture the process to be used and the content tobe covered.

Steps

The steps needed to complete the learning session are listed in the order in whichthey should be implemented. Special features for the trainer to note include thefollowing:

Italics font (italic) = instructions for the trainer (not to be read tothe trainees)

Regular font (regular) = specific information, instructions orquestions 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 usingwith the trainees

[Square Brackets] = the “correct” answer to expect from a technicalquestion

(Parenthesis) = additional instructions or information

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Each learning session guide in this module begins with a summary box thatcontains the following:

� 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 instructionsfor the learning activities that will help participants learn and work withthe 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 adultlearning to keep in mind as you lead each session. Remember that you, thetrainer, do not have all the answers. The participants come to the learningsessions with a great deal of experience and have many things to add. It isimportant that all participants (including you) teach and learn.


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IMPORTANT PRINCIPLES TO REMEMBER

� Create a safe learning environment

� Give feedback to the participants and praise them for their efforts

� Think about ways of making the topic useful to all the participants present

� Let the participants know that you are a learner with them

� Use small groups (as suggested in the session guide). Small groups helpinvolve all participants, build a sense of teamwork and create safety

� Show respect by valuing the participants’ knowledge and experience withthe subject

� Be sure that throughout the session there is an opportunity for thinking,acting and feeling

STEP 1Introduce the Module on Savings

5 MINUTES

Say the following:

Welcome to the financial education training aboutsavings. Through the activities in this module wewill work with you to improve good savingspractices. The following topics will be covered:

1. Savings: What Are They and Why Save?

2. Set Savings Goals

3. Increase Your Savings

4. Save for Emergencies

5. Decide How to Save

6. Compare Savings Services

7. Select Savings Products

8. Meet with the Providers of Savings Services

9. Make a Savings Plan

STEP 2Define Savings and WhyPeople Save 30 MINUTES

Ask the large group the following question:

� What are savings?

Savings: What AreThey and Why Save

SESSION 1

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OBJECTIVESBY THE END OF THE LEARNINGSESSION, PARTICIPANTS WILL HAVE:

1. Defined savings2. Described and categorized purposesof savings

3. Identified how to overcome savingsdifficulties

TIME80 MINUTES

PREPARATIONS/MATERIALS� 3 BLANK CARDS FOR EACH

PARTICIPANT

� FLIP CHARTS FOR USE IN THEFOLLOWING STEPS:

Step 2:• What Are Savings?Step 4:• Blank flip chart with title“Barriers to Saving Money”

� HANDOUT

Step 3:• 1.1: Instructions to Create anImaginary Case Study Family

� MARKERS

� MASKING TAPE

� FLIP CHART PAPER

STEPS1. Introduce the module on savings

5 MINUTES

2. Define savings and why people save30 MINUTES

3. Create a case study family30 MINUTES

4. Identify the difficulties of saving15 MINUTES


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

Give each participant 3 cards and a marker. Ask the following:

� What are 3 reasons why people save?

Write one reason on each card. Write large enough for all to see.

When the participants are finished, ask them to post their “reason cards”on the wall.

If participants do not read or write, encourage them to express their ideas indrawings, however simple, or allow them to call out the reasons and write eachon a card for them.

The reasons may include the following:

� Sickness

� Weddings

� Funerals

� Old Age

� To pay for basic household items during a season of low income

� Vacation or Travel

� Emergencies

� House

� TV

� Refrigerator

� Motorcycle

� Education

� Home Improvement

� Invest in Business


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WHAT ARE SAVINGS?

� Money that is put away in the present for use in the future

� Investments in jewelry, animals or land that can be sold when cash is needed

� A way of building assets

� A fundamental part of money management

� Luxury Items

� Childbirth

� Gifts

� Holidays/Festivals

Next, say:

� Let’s 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 categoriesof savings. See the example below.

Say:

Every individual or family has different reasons to save. Saving helps us toprotect against future unexpected events, plan for future anticipated eventsand build assets. It also permits us to enjoy the pleasures of life. But despitethe obvious benefits of saving, many people do not do it.

SESSION 1: Savings: What Are They and Why Save

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UnexpectedFuture Events

ExpectedFuture Events

OptionalExpenditures

BuildingAssets

� Sickness

� Funerals

� Emergencies

� Theft

� Weddings

� Education

� Childbirth

� Old Age

� Holidays/Festivals

� Low-IncomeSeason

� Vacation

� HomeImprovement

� Luxury Items

� Gifts

� House

� Bicycle

� Motorcycle

� Car

� Business

STEP 3Create a Case Study Family 30 MINUTES

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 theirimaginary family (from the list below), and a flip chart and markers to draw it.

� Grown couple with older children away from home.

� Newly married couple just starting out.

� Widow with four young children.

� Couple with teenagers living in an area with frequent flooding.

� Couple with three daughters. He’s 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 theseguidelines, draw the family members. In a balloon next to each family member,describe their characteristics.

Include the following:

� Their age

� Their occupation (housewife, self-employed, salaried, student, etc.)

� Their short- and long-term goals

For your family, decide the following:

� The level and frequency of income (daily, weekly, seasonal)

� The type of housing they live in (the roof and wall materials)

� Their assets

Draw this information about income, housing and assets in the backgroundof the picture.


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Share an example such as the one below.

Explain:

You will have 10 minutes for this activity. Your example can be simpler than itwould be in real life. We will use these families to explore the difficulties ofsavings and the tools that can help meet those difficulties. We can apply thelessons 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 anddifficulties will help us learn to deal with the difficulties in our own families.

STEP 4Identify the Difficulties of Saving 15 MINUTES

Ask:

� Why is it difficult to save money?


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Wife—� Age 39� Small restaurant

� Goals: increase sizeof business

� Repair roof of house

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

Give the groups a few minutes to talk about the specific difficulties their casestudy 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 savingis hard work. To save when you have little to start with requires sacrifice. Inorder to save, you will likely have to give up something important. It takesdiscipline.

Ask:

� What can be done to overcome these barriers to saving?

Ask for volunteers to share their ideas. Highlight the common themes. Be sure toinclude the following 2 rules of saving:

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


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BARRIERS TO SAVING MONEY

TWO RULES OF SAVING

� Spend less than you earn!

� Save something every day or week!

HANDOUT 1.1Instructions to Create an ImaginaryCase Study Family

Each group has guidelines for an imaginary case study family. Following theseguidelines, draw the family members. In a balloon next to each family member,describe their characteristics.

INCLUDE THE FOLLOWING:

� Their age

� Their occupation (housewife, self-employed, salaried, student, etc.)

� Their short- and long-term goals

FOR YOUR FAMILY, DECIDE THE FOLLOWING:

� 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 ofthe picture.


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STEP 1Set Savings Goals 35 MINUTES

Say:

We have talked about the different reasons peoplesave. Now please find the group with which youcreated an imaginary family. In your groups,consider the following question.

� What are the savings goals of yourimaginary family?

List these goals on a piece of paper or rememberthem.

After the participants have listed the goals, explainthe following:

� Savings goals can be short-term or long-term.

� Short-term goals are those that will be reachedin less than 1 year, such as paying school fees.

� Long-term goals are those that will take morethan 1 year to reach, such as home improve-ments or buying a house.

(Note: The Content Note includes a thirdcategory of “medium-term” goals, defined asthose that can be achieved in 1–3 years. Tokeep things simple for training, this Guide onlypresents 2 categories of goals: short-term, lessthan one year; and long-term, more than oneyear.)

Set Savings Goals

SESSION 2

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1. Set short- and long-termsavings goals

2. Ranked the importance ofsavings goals

3. Developed a savings plan forthe family

TIME65 MINUTES

PREPARATIONS/MATERIALS� FLIP CHART FOR USE IN THE

FOLLOWING STEP:

Step 1:• Savings Goals and PlanningWorksheet

� HANDOUTS

Step 1 and 3:• 2.1: Savings Goals andPlanning Worksheet

STEPS1. Set savings goals

35 MINUTES

2. Rank the importance ofsavings goals10 MINUTES

3. Develop a savings plan for yourown family20 MINUTES


Review the goals of your case study family. Separate the short- and long-termgoals.

Pass out Handout 2.1: Savings Goals and Planning Worksheet chart for planningsavings goals to each group.

Use the table to set savings targets for your imaginary family. Leave the lastcolumn blank for now.

Post a flip chart of the table and demonstrate how to use it with the exampleprovided. Give the participants about 20 minutes for this exercise.

Ask each group to present its work. Encourage the other groups to ask questions.

STEP 2Rank the Importance of Savings Goals 10 MINUTES

Explain:

Review the savings goals you have set. Because it may not always be possible toreach all of your goals, you should know which ones are your priorities. Rankthe goals of your imaginary family in order of importance using 1 for the mostimportant, 2 for the next most important and so on.


14

SAVINGS GOALS AND PLANNING WORKSHEET

Savings Goal Lump SumNeeded When Needed?

Amount ofSavings

Required perWeek or Month

Ranking ofImportance

Short-termEducation Fees $120 In 6 months $20/monthEmergencyFund $180 In 3 months $60/month

Long-termNew Roof $720 In 36 months $20/month

Total SavingsRequired $1,020 $100/month

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 3Develop a Savings Plan for Your Own Family

20 MINUTES

Say:

Think about your savings goals for your own family. What do you need to savefor in the short term? What future long-term goals do you have? To achieveyour financial goals, you will need a plan that states each goal, the amount ofmoney you will need to achieve that goal, and the amount you will save eachweek or month over a defined period. To make this plan, you must look at yourincome, determine how much you have available to set aside as savings, anddecide your savings priorities. Which goals are most important to you? A clearplan will help you know what to do, increase your discipline to save and bemore successful in reaching your savings goals.

Distribute Handout 2.1: Savings Goals and Planning Worksheet. This time, give acopy to each participant, and ask him/her to complete it based on his/her ownsavings 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-termsavings goals and 2 long-term savings goals. When they have identified theirgoals, 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 animaginary family?

SESSION 2: Set Savings Goals

15

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� How are your priorities (the way you ranked your goals) different fromthose 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 goalsand 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 fortaking on the challenge!


16

HANDOUT 2.1Savings Goals and Planning Worksheet

SESSION 2: Set Savings Goals

17

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SAVINGSGOAL

LUMP SUMNEEDED

WHENNEEDED?

AMOUNT OFSAVINGS

REQUIRED PERWEEK ORMONTH

RANKING OFIMPORTANCE

Short-term

Long-term

Total SavingsRequired

STEP 1Explain How to Save Usinga Story 30 MINUTES

Ask the following:

� What can people do to save more money?[Cut spending, save a portion of income as soonas it is earned, invest and use a portion ofreturns, have less debt, etc.]

Summarize the ideas of the group, making thefollowing points.

The amount you can save depends on the amountof money you have available. For many people,having money to save depends on the time ofyear. Let us examine one family’s situation anddetermine the amount they can save and when.

Read the story to the group, or pass it out with thequestions if the participants read well, and askthem to read the story.

Increase Your Savings

SESSION 3

19


1. Identified savings goals2. Determined one family’s capacityto save

3. Identified actions that the familycan take to increase savings

TIME45 MINUTES

PREPARATIONS/MATERIALS� HANDOUT

Step 1:• 3.1: Maria’s Family


� MARKERS

STEPS1. Explain how to save using a story

30 MINUTES

2. Reinforce the rules of saving witha song15 MINUTES


WHERE DO SAVINGS COME FROM?

� Setting aside a portion of income

� Cutting costs (household expenditures, debtpayments, optional expenses)

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MARIA’S FAMILY

Maria and her husband, Jorge, live on the outskirts of a major town. Shehas a small sidewalk restaurant and he works as a day laborer on a bigfarm. They have 4 children: Joseph, age 13; Orianna, age 10; Lulu, age4; and baby Aris, age 10 months. They work hard just to pay for foodand rent. They struggle each year to pay school fees for Joseph andOrianna in October and February. In the cold season, November–February, expenses are high for fuel and energy. The business does notdo well at this time. Maria takes loans from an MFI every year in earlyDecember. She borrows often from her women’s group to supplement MFIloans and pay for school and emergencies. MFI loan payments are duemonthly. She sometimes uses one loan to make payments on the otherone. Jorge works at the restaurant during the cold season when there isno other work available. The restaurant does well during the warmseason, June–August, and around the holidays in December and April.It is tradition for the family to buy new clothes and hold a big partyduring each of the holidays.


� What are the savings goals of Maria’s family? [Emergency funds, schoolfees, getting through the cold season, invest in the business to reduce loansrequired]

List the goals on a flip chart. Then ask participants to rank the goals in order ofpriority.

� What are the most important, next most important (and so on)goals for Maria’s 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. Beprepared to report back to the large group after 5 minutes.

� When and how can Maria’s family save?

Make sure the following points are covered by the groups:

� Save during the summer when the restaurant is doing well.

� Reduce holiday spending and save the money instead.

� Reduce the amount of loans.

� Take a small amount of income out of restaurant sales during the warmseason and the holidays.


20

� Start another business during low periods for the restaurant and save someof the earnings.

� Purchase food and supplies in bulk when there is money, and therefore saveon expenses.

Tell the participants the following:

Take a few minutes to write down (or think about) 2 ways your own family cansave more based on what you have learned.

After a few minutes, ask for volunteers to share their ideas.

STEP 2Reinforce the Rules of Saving with a Song 15 MINUTES

Explain:

With savings, taking action can be harder than discussing ideas. It is easy tounderstand why saving is so important for our financial security, but harder toactually save. We have identified the many difficulties to saving that many ofus know well. It is easy to conclude “We have no money to save”. It is muchharder to force ourselves to find a little something to save each day or eachweek, even if it is only a penny. To do this, you must follow the basic rules ofsavings we discussed above.

Divide participants into 2 groups and assign each group 1 of the savings rules.Their task is to make up a short song about this rule.

Explain:

Each group will make up a short song to sing about their assigned savings rule.Your tune should be easy to remember so that you can sing the song often. Youcan use a tune you already know, or make up a new one. The song can includeother words as well or simply repeat the savings rule to music.

Give them 10 minutes for this exercise.

SESSION 3: Increase Your Savings

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TWO RULES FOR SAVING

� Spend less than you earn!

� Save something every day or week!

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 ifparticipants come up with a song that is funny, or memorable in some otherway, you should ask them to sing it again periodically throughout thetraining. You can offer a prize to whomever remembers the song, whomevervolunteers to sing it, whomever initiates singing at the end of a session, etc.Use your own creativity!)


22

HANDOUT 3.1Maria’s Family

Maria and her husband, Jorge, live on the outskirts of a major town. Shehas a small sidewalk restaurant and he works as a day laborer on a bigfarm. They have four children: Joseph, age 13; Orianna, age 10; Lulu, age4; and baby Aris, age 10 months. They work hard just to pay for foodand rent. They struggle each year to pay school fees for Joseph andOrianna in October and February. In the cold season, November–February, expenses are high for fuel and energy. The business does notdo well at this time. Maria takes loans from an MFI every year in earlyDecember. She borrows often from her women’s group to supplement MFIloans and pay for school and emergencies. MFI loan payments are duemonthly. She sometimes uses one loan to make payments on the otherone. Jorge works at the restaurant during the cold season when there isno other work available. The restaurant does well during the warmseason, June–August, and around the holidays in December and April. Itis tradition for the family to buy new clothes and hold big partiesduring the holidays.

� What are the savings goals of Maria’s family?

� What are the most important, next most important (and so on)goals for Maria’s family?

SESSION 3: Increase Your Savings

23

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STEP 1List Emergencies and TheirConsequences 15 MINUTES

Explain:

One of the most important reasons to have savingsis to pay for emergencies and other unexpectedevents. Let us brainstorm the types of emergenciesand unexpected events that can occur at any time.

Write the ideas on a flip chart. Then ask:

� What emergencies do you think will havethe most severe financial consequences?

Circle the emergencies that they mention. Choose nomore than 5 or 6. Say:

Get into the groups you have worked with tocreate an imaginary family. Discuss how to answerthe following questions:

� What are the emergencies that yourimaginary family is likely to face in a year?

� What will be the consequences for thefamily if they do occur?

Give the groups 5 minutes to discuss thesequestions. While they are discussing, put up theblank flip chart with 2 columns labeled “Type of

Save for Emergencies

SESSION 4

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1. Listed the types of emergenciesand their consequences

2. Practiced estimating the amountof money needed for emergencies

3. Described how they can copewith emergencies by having anemergency fund

4. Included emergencies insavings goals

TIME65 MINUTES

PREPARATIONS/MATERIALS� FLIP CHARTS FOR USE IN THE

FOLLOWING STEPS:

Step 1:• Flip chart with 2 blankcolumns labeled “Type ofEmergency” and“Consequences”

Step 2:• How Much Money Should YouSave for Emergencies?

• Maria’s Family Earnings• Flip chart with blank 2columns labeled“Difficulties” and “Advice”


� MARKERS

STEPS1. List emergencies and theirconsequences15 MINUTES

2. Estimate the amount of moneyneeded for emergencies30 MINUTES

3. Discuss how to maintain theemergency fund10 MINUTES

4. Include emergencies in thesavings goals10 MINUTES


Emergency” and “Consequences”(see below). Then ask each group to report on adifferent type of emergency and the consequences.

Record their ideas on a flip chart.

When they are finished, summarize by saying:

Emergencies mean immediate costs to the family. The costs may include medicalbills, rebuilding from a disaster, replacing stolen goods or keeping up loanpayments even after you have lost your business. If a principal income earneris unable to work due to an emergency, the family will lose even more income.

STEP 2Estimate the Amount of Money Needed forEmergencies 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 smallemergencies. 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 youmanage many smaller unexpected events and prevent further losses. The rulefor the amount of money to be kept in the emergency fund is as follows:


26

Type of Emergency Consequences

Post the following on a flip chart.

The more people you care for, the more money you are likely to need foremergencies and unplanned events. Larger families should keep 6 monthsaverage monthly income in an emergency fund.

Let us practice estimating how much money to put in an emergency fund.

Show Maria’s family earnings on a flip chart.

Here are Maria’s family earnings each month for one year.

� What is the total amount Maria’s family needs to keep in anemergency fund?

Demonstrate on a flip chart or board how to calculate the amount of money tokeep in an emergency fund.

SESSION 4: Save for Emergencies

27

HOW MUCH MONEY SHOULD YOU SAVE FOR EMERGENCIES?

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

MARIA’S FAMILY EARNINGS

Month AmountJanuary $15February $15March $15April $40May $25June $35July $35August $40September $20October $20November $10December $30

Total $300

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Annual income divided by 12 months in year = Average monthly income$300 divided by 12 months in year = $25

Three times her average monthly income: $25 x 3 = $75

Maria’s family needs to have $75 in an emergency fund.

In your groups, examine your imaginary family’s situation and decide howmuch they need to keep in an emergency fund.

Give the groups about 10 minutes for this exercise. Bring the groups backtogether to share their responses.

Ask the following questions:

� What are the difficulties that a family can have in trying to setaside this much money?

� What is your advice to them?

List the difficulties and the advice on a flip chart similar to the one below:

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 asour homes or a crop.


28

Difficulties Advice

I barely have enough money to feedmy family and pay for other basicnecessities.

� Start setting aside something, evenif it is only a very small amount,every day or every week. The amountwill grow.

� Look hard for ways to cut unnecessaryspending.

When I save, my husband alwaysasks to use the money I have saved.

� Keep money in a secure location,preferably out of the house so it isnot accessible. Open a bank account.

My income is irregular. � Save different amounts each timeyou earn some income.

I must use all the available earningsto pay off debts.

� Make a schedule to pay off the mostexpensive debts first.

STEP 3Discuss How to Maintain the Emergency Fund

10 MINUTES

Explain:

You will need your emergency fund from time to time. As you use it, it willdecrease.

� What are your suggestions to maintain enough money in theemergency fund?

Summarize the ideas, making the following points.

� When you use the fund, replace the money as soon as possible.

� Decide how much you can contribute to the emergency fund each day, eachweek or each month, and stick to your plan.

STEP 4Include Emergencies in the Savings Goals 10 MINUTES

Ask the participants to get back into groups to discuss their case studyfamilies. Say:

Please discuss how to answer the following question:

� What changes will you make to the goals of your imaginary family toaddress emergencies?

Give the groups 5 minutes to review the goals and make changes. Ask for 2 or 3volunteers to share their changes.

Close the meeting, saying:

If you plan ahead for emergencies, you will have more success reaching yourother goals. With an emergency fund you can avoid using the savings you havefor goals such as education and housing improvements. You can also avoidcostly borrowing.

SESSION 4: Save for Emergencies

29

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STEP 1Identify Factors that Best HelpPeople to Save 15 MINUTES

Tell participants the following:

Form groups of 5. Select a recorder to list theresponses to the following question.

� What makes it most likely that peoplewill save?

List everything you can think of in 5 minutes, andthen we will see which group has come up withthe most ideas.

While they are working, post the flip chart titledInternal/External Factors Influencing Savings.

After 5 minutes ask the groups to tell you howmany ideas they have. Congratulate the group withthe most ideas. Ask this group to report all of itsideas and list them on a flip chart. Then ask theother groups to add any ideas that have not beenmentioned. The ideas may include the following:

Decide How to Save

SESSION 5

31

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1. Listed conditions that helppeople save successfully

2. Debated which conditions we canand cannot control

3. Listed ways to save more

TIME35 MINUTES

PREPARATIONS/MATERIALS� FLIP CHART FOR USE IN

FOLLOWING STEP:

Step 1:• Internal/External FactorsInfluencing Savings


� MARKERS

STEPS1. Identify factors that best helppeople to save15 MINUTES

2. Decide how to save20 MINUTES


Now, let’s look at this list and underline those items that we ourselves cancontrol. These are all things that do not depend on other people or externalor environmental factors.

Differences of opinion are likely to emerge as the group identifies those factorswithin our personal control. When there are differences, encourage a short debatebetween 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 reallywithin 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 inour control.


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INTERNAL/EXTERNAL FACTORS INFLUENCING SAVINGS

� A safe place to keep savings

� A good savings plan

� Discipline

� Family support for the decision to save

� Motivation to meet personal goals: house, marriage, education, etc.

� A convenient place to save (close to home, easy to get to, etc.)

� Interest on savings

� Desire to resist temptation to spend money on luxury items

� Size of allowable deposits fits ability to save

� Willingness to reduce expenses

� Ability or opportunity to earn more income

STEP 2Decide How to Save 20 MINUTES

Give the following instructions:

Select a partner. Pretend that 1 of you does not save while the other is a goodsaver. The good saver is going to tell her partner how she can save more. Raiseyour 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 groupwhat 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 ideaslisted below.

To help you save more, you can…

� 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

Summarize the discussion by saying:

You have identified many ways to save during this session. You do not need tohave a lot of money to save. Everybody can save a little money on a daily orweekly basis. You need a plan and the discipline to stick to it by controllingyour 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.

SESSION 5: Decide How to Save

33

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5

STEP 1Identify Savings Vehicles thatare Available to People in thisCommunity 25 MINUTES

Ask the participants the following:

� What are the ways people save in yourcommunity?

Probe for all the ways people save, from home tobanks. Write their answers on a flip chart orsummarize them orally.


There are many vehicles for savings, both formaland informal.

A formal savings institution is regulated by agovernment agency to ensure the safety ofsavings. Usually, formal savings services payinterest on savings. And some institutions insuresavings. That is, if the institution loses yourmoney, the government will reimburse you foryour losses up to a certain amount.

Semi-formal savings methods fall in the middlebetween the formal and informal. Semi-formalsavings institutions offer organized services butare not supervised or regulated by the govern-ment. They include savings collectors, villagebanks and other microfinance-group mechanisms.

Compare SavingsServices

SESSION 6

35

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6

OBJECTIVESBY THE END OF THE LEARNINGSESSION, PARTICIPANTS WILL HAVE:1. Identified savings options2. Distinguished between formal,semi-formal and informal savingsservices

3. Described the advantages anddisadvantages of formal, semi-formal and informal services,including degree of risk

4. Identified the features of savingsservices that will influencetheir choice

TIME70 MINUTES

PREPARATIONS/MATERIALS� 15–20 BLANK CARDS� FLIP CHARTS FOR USE IN

FOLLOWING STEPS:Step 1:• Flip chart with 3 blankcolumns labeled “Formal,”“Semi-formal” and “Informal”

Step 2:• Flip chart with 4 blankcolumns labeled “SavingsServices,” “Advantages,”“Disadvantages” and “RiskRating”

Step 4:• Blank flip chart with title“Characteristics to ConsiderWhen Choosing a SavingsService”

� FLIP CHART PAPER� MARKERS� MASKING TAPE

STEPS1. Identify savings vehicles that areavailable to people in thiscommunity25 MINUTES

2. Discuss the advantages anddisadvantages of different methodsof savings25 MINUTES

3. Determine which savings serviceis safest10 MINUTES

4. Identify features that mightinfluence our choice of savingsservice10 MINUTES


An informal savings vehicle is one you manage yourself, usually at home. Youmay keep your savings in cash, or jewelry or livestock. Savings of this naturedoes not have oversight from a government agency.

Now return to the list of savings methods people use in this community. Invitethe group to help you decide whether each is a formal, informal or semi-formalway to save. Mark Informal with an “I,” Formal with an “F” and Semi-Formalwith an “S.” See the chart below to assist you.

For each category, ask participants to raise their hands if they respond positivelyto 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 peoplefor 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 personsquestions about the service.

Clarify when necessary and keep a list of issues that remain unanswered orunresolved.


36

Formal Semi-Formal Informal

� Bank

� Credit Union

� Regulated MFI

� Post Office

� Groups: savings andcredit associations,village banks,solidarity groups,self-help groups

� Savings Collector

� Non-Regulated MFI orCooperative

� At Home (in cash)

� In Kind (gold, jewelry,livestock, land, etc.)

� Other

STEP 2Discuss the Advantages and Disadvantages ofDifferent Methods of Savings 25 MINUTES

Divide the participants into small groups (it is recommended to mix the teams asthe task does not concern the case study families).

Put the different types of savings services on cards. Ask each group to pick1 or 2 cards.

Give the groups the following instructions:

For each savings service you have selected, discuss its advantages anddisadvantages.

Give the groups 5 minutes for this exercise.

While they are working, post a blank table as shown below, drawn on a flip chart.

When they have completed this discussion, bring the groups back together andask them to put their “Service Card” in the “Savings Service” column and reporttheir ideas about its advantages and disadvantages. Write their ideas in theappropriate columns on the flip chart. The result will look something like thetable below:

SESSION 6: Compare Savings Services

37

Savings Service Advantages Disadvantages Risk RatingFormal

Semi-Formal

Informal

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38

SavingsService Advantages Disadvantages Risk

RatingFormal

Banks

Post Office

Credit Union

Regulated MFI

� Safest option

� Less temptation towithdraw and spend

� May earn interest

� Access to wider rangeof savings products(certificates of deposit,current account,pension funds, etc.)

� Helps to manage money

� Can save time on billpayments

� Low remuneration

� Minimum depositrequired to openaccount may be barrier

� May charge fees

� Long lines and delaysinside bank

� Can be confusing

� Less accessible to poorand those who cannotread and write

Semi-Formal

Savings withGroup (villagebank, non-regulated savingsand creditassociation, etc.)

ROSCAs

Deposit Collectors

� Easy access

� Savings often linked tocredit

� May earn dividends onloans made withsavings

� Group rules aboutfrequency and amountof deposits encouragessaving

� Discipline

� Safety not guaranteed

� May or may not earninterest

� May have limited or noaccess to loans

� Limited access tosavings or withdrawalssubject to groupapproval

Informal

At Home(in cash)

� Easy access � Not safe

� Too easy to spend and‘waste’ on non-essentialitems

In Kind (gold,jewelry, livestock,land, etc.)

� Value might increaseover time

� Must sell to accesscash—decreasestemptation

� Difficult to liquidate incase of emergency

� Value could decreaseover time

� Risk of theft or death(in case of animals)

STEP 3Determine 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 thefollowing 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 willuse a scale of 1, 2, 3 to rate each service. One is low safety. Two is averagesafety—“sort of” safe. Three is very safe.

Return to the chart and point out the last blank column. Ask participants toconsider each service and give it a 1, 2, or 3 depending on how safe they thinkit is. For each service, call on 3 volunteers to share their ranking and fill in thesquares in this last column with their votes. If participants disagree, encouragediscussion to air all points of view.

STEP 4Identify Features that Might Influence OurChoice of Savings Service 10 MINUTES

Say:

We have many ways to save, each with its own positive features and weakpoints. Some of us might be most interested in earning the highest possibleinterest rate; others might be more concerned about convenience and look forthe closest place to save.

Ask:

� What are the characteristics of savings services that are importantto consider when selecting a service?

SESSION 6: Compare Savings Services

39

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6

Solicit a number of responses and write them on a flip chart. If all of thefollowing are not named, add missing items from below to the list.

Ask participants to turn to the person next to them and exchange their ideasabout 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 importantfactor when selecting a savings vehicle, which would you choose foryourself? Why?

After 5 minutes, ask several people to share their partner’s choice and why it isimportant.

Make the following point:

Savers choose different kinds of services because they each have differentneeds and priorities. It is important that you choose the service that is rightfor you.


40

CHARACTERISTICS TO CONSIDER WHEN CHOOSINGA SAVINGS SERVICE

� Access

� Convenience and ease of use

� Opening deposit requirements

� Safety

� Interest earned on savings

STEP 1Match Savings Products toSavings Goals 10 MINUTES

Say:

Now we are going to talk about the different typesof savings products that are available and matchthe products to different savings goals. To do this,let us remember some of the things we learned inprevious sessions.

First, let us review the features of savings servicesthat are important. They include the following:

� Access

� Convenience and ease of use

� Opening deposit requirements

� Safety

� Interest earned on savings

Then say:

Let us also remember the difference betweenshort-term and long-term savings goals.

Select SavingsProducts

SESSION 7

41

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1. Stated the features of differentsavings accounts offered byformal banks

2. Matched savings goals withspecific savings products

3. Identified the appropriate use foreach type of savings account

TIME45 MINUTES

PREPARATIONS/MATERIALS� FLIP CHART FOR USE IN THE

FOLLOWING STEP:

Step 2:• Formal Institution SavingsProducts

� HANDOUT

Step 2:• 7.1: Formal InstitutionSavings Products

� CARDS

Step 3:• Scenario #1–4

STEPS1. Match savings products tosavings goals10 MINUTES

2. Present and discuss formalsavings institution savingsproducts10 MINUTES

3. Select a product to match specificsavings goals20 MINUTES

4. Determine which type of accountwould be most helpful5 MINUTES



� What is an example of a short-term savingsgoal? What is another example?

� What is an example of a long-term savings goal? What is anotherexample?

Thank you for these examples. As you remember, a short-term savings goal isfor an expenditure you expect to occur within 1 year. A long-term savings goalis one you expect to occur perhaps in 2 or 3 or even more years.


Whether you are saving for a house or school fees for next term, you areputting money aside and resisting the temptation to spend it.

� How do you think your savings goal will influence how you save? [Forshort-term goals, you put aside as much money as you can within a definedperiod of time. When that period is over, you withdraw your savings to meetthe goal—to 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 asmaller amount on a regular basis over a longer period. You hope not towithdraw it and just keep saving until you reach your goal.]

Explain:

Banks have various savings products that are tailored to your savings goals. Thelonger you agree to leave your money in the bank, the higher the interest ratethe bank will pay. If you need to make frequent withdrawals, you will likelyhave an account that earns a lower interest rate.

Ask:

� What features of a savings account will help you save when you aresaving for the long term? [high interest rates; limited withdrawals]

Now, let’s say you are saving for your child’s school fees that are due every 3months.

� What features do you want your savings account to have? [unlimiteddeposits and withdrawals—frequent access]

You can see that different savings goals require different savings products. Letus now learn about the typical type of savings product available at financialinstitutions.


42

STEP 2Present and Discuss Formal Savings InstitutionSavings Products 10 MINUTES

Explain that 1 of the advantages of saving at a formal financial institution, suchas a bank, is that there is a choice of savings accounts. Tell the participants thatthey will learn about the most common accounts. Post the prepared flip chartbelow and review.

SESSION 7: Select Savings Products

Sess

ion

7

FORMAL INSTITUTION SAVINGS PRODUCTS

Type of SavingsProduct How It Works Uses

Regular or PassbookSavings

� Voluntary timing and amountof deposits.

� Flexible withdrawals.

� May or may not pay interest.

� Emergencies andunexpected opportunities.

� If only one product can beoffered, this type of productoften is the one that bestmeets client demand.

Contractual Savings

(Also known as“accumulateddeposit, fixed-termaccount”)

� Regular deposits of fixedamount over a pre-determinedperiod of time. Client candecide how much to save forhow long (choosing from apre-set range of terms).

� Access to savings restricteduntil contract is fulfilled.

� Penalty is paid for earlywithdrawal.

� Interest usually higher thanregular savings account.

� Can borrow against your savings.

� For expected needs.

Time Deposit � Fixed sum for a predeterminedterm and rate of interest.

� Requires minimum deposit.

� Inflexible.

� Pays a higher interest ratethan either a passbook or acontractual savings productfor same amount of savings.

� For larger needs expectedin future such as marriage,or a major capitalpurchase.

43

Ask:

� Which account do you prefer? Why?

Distribute Handout 7.1: Formal Institution Savings Products.

STEP 3Select a Product to Match Specific Savings Goals

20 MINUTES

Divide participants into 2 teams. Give each team 2 scenarios below written oncards. Teams will take turns reading a scenario aloud and asking the otherteam to decide which savings product is best suited to the saver described inthe scenario.


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SCENARIO #1

Elena wants to save for her daughter’s wedding next year. She has almost nothingsaved now, but if she puts aside $5 every week for a year, she will have justenough for the wedding. So, she can’t be tempted to dip into these savings foranything else.

[Answer: Contractual Savings Account]

SCENARIO #2

Maria has just completed a learning session on savings for emergencies. Now sheis determined to save every month, even if she can only afford a small deposit.She doesn’t know what she might need the money for now, but she doesn’t wantan unexpected illness or accident to ruin her family.

[Answer: Passbook savings will allow her to make small deposits whenever she canand withdraw money when she needs to. Since she does not know when she mightneed to withdraw money for an emergency, she probably wouldn’t want restrictedaccess that would force her to pay a penalty if she takes money out before hercontract period is up.]

STEP 4Determine Which Type of Account Wouldbe Most Helpful 5 MINUTES

Ask:

� In your case study family, which type of savings account would bemost useful?

� Would you be interested in more than one type of account? Why?

Ask if participants have any other questions about savings products that banksoffer. 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.


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SCENARIO #3

Anita just received $200 from her son who is working abroad. She could spendthis money on any number of important things, but she really wants to put itaway for her daughter’s university education. Although her daughter won’t go touniversity 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-depositaccount will earn the highest interest and keep her money safe from temptation tospend it on other things, as penalties are charged for early withdrawals.]

Sess

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7

SCENARIO #4

Nina needs a place to save a portion of her sales earnings from her used clothingstall. She needs to save for the monthly delivery of clothing bales. She wants tobe able to save weekly and withdraw the amount she needs every month to buy anew bale of clothing.

[Answer: Passbook savings operate like a current account for regular deposits andwithdrawals. Nina will trade access to her account for income and growth, as theseaccounts typically pay a very low interest rate.]

Scenario Cards

SCENARIO #1

Elena wants to save for her daughter’s wedding next year. She has almostnothing saved now, but if she puts aside $5 every week for a year, she willhave just enough for the wedding. So, she can’t be tempted to dip intothese savings for anything else.

[Answer: Contractual Savings Account]

SCENARIO #2

Maria has just completed a learning session on savings for emergencies. Nowshe is determined to save every month, even if she can only afford a smalldeposit. She doesn’t know what she might need the money for now, but shedoesn’t want an unexpected illness or accident to ruin her family.

[Answer: Passbook Savings will allow her to make small deposits whenevershe can and withdraw money when she needs to. Since she does not knowwhen she might need to withdraw money for an emergency, she probablywouldn’t want restricted access that would force her to pay a penalty if shetakes money out before her contract period is up.]

SCENARIO #3

Anita just received $200 from her son who is working abroad. She couldspend this money on any number of important things, but she really wantsto put it away for her daughter’s university education. Although her daugh-ter won’t go to university for another 3 years, Anita knows that she willneed a lot of money.

[Answer: Since Anita does not plan to spend this money for 3 years, atime-deposit account will earn the highest interest and keep her money safefrom temptation to spend it on other things, as penalties are charged forearly withdrawals.]

SCENARIO #4

Nina needs a place to save a portion of her sales earnings from her usedclothing 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 needsevery month to buy a new bale of clothing.

[Answer: Passbook savings operate like a current account for regular depositsand withdrawals. Nina will trade access to her account for income andgrowth, as these accounts typically pay a very low interest rate.]


46

HANDOUT 7.1Formal Institution Savings Products


47

Sess

ion

7

TYPE OF SAVINGSPRODUCT HOW IT WORKS USES

Regular or PassbookSavings

� Voluntary timing and amountof deposits.

� Flexible withdrawals.� May or may not pay interest.

� Emergencies andunexpected opportunities.

� If only one product can beoffered, this type ofproduct often is the onethat best meets clientdemand.

Contractual Savings

(Also known as“accumulateddeposit, fixed-termaccount”)

� Regular deposits of fixedamount over a pre-determinedperiod of time. Client candecide how much to save forhow long (choosing from apre-set range of terms).

� Access to savings restricteduntil contract is fulfilled.

� Penalty is paid for earlywithdrawal.

� Interest usually higher thanregular savings account.

� Can borrow against your savings.

� For expected needs.

Time Deposit � Fixed sum for a predeterminedterm and rate of interest.

� Requires minimum deposit.� Inflexible.� Pays a higher interest rate

than either a passbook or acontractual savings productfor same amount of savings.

� For larger needs expectedin future such as marriage,or a major capitalpurchase.

STEP 1Recall the Different SavingsServices 5 MINUTES


� What are the different categories of savingsservices we talked about at our lastmeeting? [Informal, Semi-Formal and Formal]

� What are some of the differences betweeninformal and formal savings services?[Safety, interest rates, choice of savingsproduct, convenience, access to savingswithdrawals]

Explain that today we will be preparing for our visitto some of our local banks to conduct interviewswith bank employees to learn more about theirservices. To prepare, we are going to start byreviewing the features of a savings service that willbe important for us to consider in choosing the onewe would like to use.

Meet With theProviders ofSavings Services

SESSION 8

49

Sess

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8

OBJECTIVESBY THE END OF THE LEARNINGSESSION, PARTICIPANTS WILL HAVE:1. Identified financial institutions in

their area2. Identified the key features of

savings products that influencewhich ones we choose

3. Developed a list of questions to askto learn about these features

4. Conducted interviews of bankemployees

5. Processed information gathered atthe bank

TIME[In this session, the 3 time periods belowmay occur on different days]PREPARATION: 75 MINUTESFIELD VISIT: 2 HOURSDEBRIEFING: 45 MINUTES

PREPARATIONS/MATERIALS� PREPARE THE FIELD VISIT FOR

PARTICIPANTS (At several localfinancial institutions, arrange ameeting for bank staff and a smallgroup of participants. Know thename of the person you will meetand the time of the meeting. Collectbrochures and other productpromotions from the banks you plan tovisit and bring them to the training.)

� FLIP CHART FOR USE IN THEFOLLOWING STEP:Step 2:• Flip chart with 2 blankcolumns labeled “ImportantConditions for Saving” and“Questions to Ask”

� HANDOUTSStep 2:• 8.1: Questions to Ask at the Bank• 8.2: Questions to Ask at theBank (with suggestedquestions)

Step 4:• 8.3: Field Visit Report Form

STEPS1. Recall the different savings services

5 MINUTES

2. Assess formal institutions’ savingsproducts45 minutes

3. Determine how well bank literatureanswers questions15 MINUTES

4. Finalize preparations for the visit tothe bank10 MINUTES

5. Report on the meeting with theproviders of savings services45 MINUTES


STEP 2Assess Formal Institutions’ Savings Products

45 MINUTES

Ask:

� Do you know the answer to the question: “Where is the best place toput your savings?”

Explain:

Although the answer to this question may be different for each of us, we canwork together to prepare questions that will help us answer it. Let us firstreview 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?

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

Important Conditions for Saving Questions To Ask

Ask:

� What conditions are on the handout that are different from the onesyou 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 inthe 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 followingquestion:

� What questions will you ask to find out what the bank policies areregarding this specific aspect?

Give the groups 10 minutes for this exercise. If convenient, have them write thequestions for their item on the flip chart. Ask each group to present its questionsto the large group.

At the end of the presentations, distribute Handout 8.2: Questions to Ask at theBank 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.

SESSION 8: Meet With the Providers of Savings Services

51


Access to Savings/Flexibility of Withdrawal

Requirements for Opening Deposit Account

Convenience, Ease of Use

Safety

Interest Earned on Savings

Cost of Savings

Liquidity

Sess

ion

8


52


Access to Savings/Flexibility ofWithdrawal

� How often can I make withdrawals?

� Is there a minimum amount I mustwithdraw?

� What withdrawal penalties does thisaccount have?

� Is there an ATM network?

Requirements for OpeningDeposit Account

� How much savings is required?

� What documentation do I need?

Convenience, Ease of Use � What are the bank’s hours?

� How long is the wait to be served?

� Do clients receive account statements?How often?

� Do you offer telephone and/or electronictransactions?

Safety � What is the reputation of the institution?

� What insurance or guarantees safeguardclients’ funds?

Interest Earned on Savings � What is the interest rate on savings?

� How does it compare to otherinstitutions?

� How often is interest paid?

� How is interest calculated? For example, isit a compound rate? (Is interest paid onboth the principal and accrued interest?)

Cost of Savings � What fees are charged? (transfers, ATMwithdrawal fee)

Liquidity � How easy is it to withdraw funds fromthe account?

� Will the full amount be available?

� Are fees charged if the funds arewithdrawn before a specified date?

QUESTIONS TO ASK AT THE BANK

Conclude by saying:

You can see that interest earned is only one of the considerations, andsometimes it is not the most important one. Each of us will have to choosewhich of these features matters more to us in relation to our savings goals.

STEP 3Determine How Well Bank LiteratureAnswers Questions 15 MINUTES

Display information about local savings services around the room. Askparticipants to select brochures to look at and prepare to share their observationswith the whole group. Say:

The banks use their own language to describe their services. Read the brochuresand think about 2 questions:

� Which of our questions does the bank’s literature answer?

� What products meet your imaginary family’s needs for saving?

Give them 10 minute to review the banks’ brochures and handouts. Then ask for afew volunteers to respond.

Ask the entire group:

� How do you think the services offered respond to the conditions wediscussed before?

Name the conditions and ask for volunteers to comment on each one.

� 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 institution’s productsto determine whether they are right for us. The same product will be slightlydifferent at each bank.


53

Sess

ion

8

STEP 4Finalize Preparations for the Visit to the Bank

10 MINUTES

Organize participants into their field trip groups and ask each group to finalizethe list of questions they want to ask at the bank. They may use the listgenerated earlier in the session or revise the list depending on the informationthat 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 servicesin your area that match your own real families’ goals. We will all gatherinformation and share it at the next session.

Distribute Handout 8.3: Field Visit Report Form to each group.

STEP 5Report on the Meeting with the Providersof Savings Services 45 MINUTES

Give each group 15 minutes to assemble the information from the field visit andprepare its report.

Give each group 5 minutes to report on 1 savings product they learned about andhow it fits an important savings goal of their case family. After each report askthe 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 yourown life?

Give 2 or 3 volunteers an opportunity to share.

Thank the group for their hard work.


54

HANDOUT 8.1Questions to Ask at the Bank


55

Sess

ion

8IMPORTANT CONDITIONSFOR SAVING QUESTIONS TO ASK

Access to Savings/Flexibilityof Withdrawal

Opening DepositRequirements

Convenience/Ease of Use

Safety


Cost of Savings

Liquidity

HANDOUT 8.2Questions to Ask at the Bank(with Suggested Questions)


56

IMPORTANT CONDITIONSFOR SAVING QUESTIONS TO ASK

Access to Savings/Flexibility ofWithdrawal

� How often can I make withdrawals?

� Is there a minimum amount I mustwithdraw?

� What withdrawal penalties does thisaccount 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 bank’s hours?

� How long is the wait to be served?

� Do clients receive account statements?How often?

� Do you offer telephone and/or electronictransactions?

Safety � What is the reputation of the institution?

� What insurance or guarantees safeguardclients’ funds?

Interest Earned on Savings � What is the interest rate on savings?

� How does it compare to otherinstitutions?

� How often is interest paid?

� How is interest calculated? For example, isit a compound rate? (Is interest paid onboth the principal and accrued interest?)

Cost of Savings � What fees are charged? (transfers, ATMwithdrawal fee)

Liquidity � How easy is it to withdraw funds fromthe account?

� Will the full amount be available?

� Are fees charged if the funds arewithdrawn before a specified date?

SESSION 8: Meet with the Providers of Savings Services

57

Sess

ion

8

FEATURES DETAILS

Access/Flexibility

Opening DepositRequirements

Ease of Use of Services

Safety


Cost of Savings

Liquidity

HANDOUT 8.3Field Visit Report Form

Institution Visited: Contact Person’s Title:

For each different product at the bank you visit, fill out the table asnecessary.

Product:

Savings Goal:

STEP 1Modify Savings Goals andDevelop Savings Targets

40 MINUTES

Ask participants to return to their case study

family groups. Tell them:

Look at Handout 2.1: Savings Goals and PlanningWorksheet that you completed in Session 2. Makemodifications based on what you have learnedabout savings.

Make a Savings Plan

SESSION 9

59

Sess

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9


1. Practiced making a savings plan2. Selected savings services thatbest match a family’s goals

3. Completed an action plan forincreasing their own savings

TIME100 MINUTES

PREPARATIONS/MATERIALS� FLIP CHARTS FOR USE IN THE

FOLLOWING STEP:

Step 1:• Savings Targets• Tips for Savings

� HANDOUTS

Step 1:• 2.1: Savings Goals andPlanning Worksheet (fromSession 2)

• 9.1: Savings TargetsWorksheet

Step 2:• 9.2: Selecting SavingsServices Worksheet

• 9.3: Rules of Thumb forSavings

STEPS1. Modify savings goals and developsavings targets40 MINUTES

2. Match savings goals to the bestsavings service30 MINUTES

3. Prepare a plan to apply whatyou have learned30 MINUTES


Example:

Explain:

For your imaginary family to meet its savings goals, determine how much theywill have to save each week or month.

Post and review completed example below:


SAVINGS GOALS AND PLANNING WORKSHEET

SavingsGoal

Lump SumNeeded

WhenNeeded?

Amount ofSavings

Required perWeek orMonth

Ranking ofImportance

Short-term

Education Fees $120 In 6 months $20/month

EmergencyFund

$180 In 3 months $60/month

Long-term

New Roof $720 In 36 months $20/month

Total SavingsRequired

$1,020 $100/month

SAVINGS TARGETSMonths

Savings Goals 1 2 3 4 5 6 7 8 9 10 11 12

Education 20 20 20 20 20 20

Emergencies 60 60 60

Roof Repair 20 20 20 20 20 20 20 20 20 20 20 20

Total MonthlySavings Goal

100 100 100 40 40 40 20 20 20 20 20 20

Total Saved

60

Distribute Handout 9.1: Savings Targets Worksheet. Ask the participants to do thefollowing:

In your case study groups, examine your imaginary family’s goals and theamount of savings required to meet each of them. Decide whether your familywill 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 thesegoals? 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 ourcapacities to save. The following tips will be helpful:

Post a flip chart with the following tips. Read or ask participants to read the tips.

Ask participants to examine their savings plans once more and make adjustmentsbased on the previous discussion. Then ask the groups to present their plans oneby one. They will present the original plan (prepared in Session 2) and the newplan, answering the following question:

� How did you change your savings plan and why?

SESSION 9: Make a Savings Plan

61

TIPS FOR SAVING

� Look for new ways to save on expenses

� Look for new ways to increase income

� Look for new ways to save part of your income regularly

� Examine whether you can meet a goal for less money

� Prioritize your goals—perhaps you can put off one goal to realize another one

Sess

ion

9

STEP 2Match Savings Goals to the Best Savings Service

30 MINUTES

Say:

Now that we have a realistic plan, the next step is to select the best savingproduct for each of our goals. We will do this on the basis of the field visitsyou 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 usingthe information we learned in the visits to savings institutions.

Distribute Handout 9.2: Selecting Savings Services Worksheet and review it withthe group. Give the groups 20 minutes to fill it in.

Give participants the following instructions for reporting:

Each group will give an example of a different savings goal and then reportsavings characteristics important for their imaginary family, the type of savingsproduct and the institution that best responds to their goal.

Ask 1 or 2 groups to share their work.


62

SELECTING SAVINGS SERVICES

SavingsGoals

What are thecharacteristics of

savings services mostimportant to the family(access, deposit rules,ease of use, safety,interest, cost, etc.)?

Which type ofsavings accountbest responds to

their needs?

Which localfinancial

institution offersthe best terms,conditions and

other features forthe family?

STEP 3Prepare a Plan to Apply What You Have Learned

30 MINUTES

Say:

You have learned many new things about savings by working on an imaginaryfamily. It is time to consider how the lessons learned can be applied in yourown family.

� What are the most important things you can do to improve savings inyour own family?

Encourage the group to mention as many ideas as they can think of. Then inviteeach one individually to prepare an action plan answering the following question:

� What are at least four steps you can take after this to improve savingsin 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 totake home.

Ask for volunteers to sing their savings song one last time!


63

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HANDOUT 9.1Savings Targets


64

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Savi

ngsGo

als

12

34

56

78

910

1112

Tota

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HANDOUT 9.2Selecting Savings Services


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SAVINGSGOALS

WHAT ARE THECHARACTERISTICS OFSAVINGS SERVICESMOST IMPORTANTTO THE FAMILY

(ACCESS, DEPOSITRULES, EASE OF USE,SAFETY, INTEREST,

COST, ETC.)?

WHICH TYPE OFSAVINGS

ACCOUNT BESTRESPONDS TOTHEIR NEEDS?

WHICH LOCALFINANCIAL

INSTITUTIONOFFERS THEBEST TERMS,CONDITIONSAND OTHER

FEATURES FORTHE FAMILY?

HANDOUT 9.3Rules of Thumb for Savings

While basic principles of money management can apply to everyone, decisionsto save or consume depend very much on your level of income, access to loans,and access to appropriate savings products. Nevertheless, there are a numberof rules of thumb that you can use to guide decisions about savings andconsumption:

� Save as much as you can as soon as you can. The more you save, the betteroff you’ll be.

� Save as you earn.

� Try to save 10% of your income even if you don’t have a specific purchase orinvestment for which you are saving.

� Pay yourself first—put 10% of your earnings aside for savings before you doanything else. If you can’t afford 10% right away, start with less, but savesomething.

� Pay off your debts: Some people recommend paying down your debt beforeyou start to save; others recommend saving even while paying down debtbecause it is important to begin building assets as soon as possible. Thischoice will depend on individual priorities, situation, and means. Totalhousehold debt should not exceed 36% of household income.

� Calculate how your money can grow over time if you save regularly in anaccount that earns interest.

� Don’t carry a lot of cash—avoid temptation to spend it!

� Spend carefully. If you purchase big items, consider how much money youcould make if you resell. Look for opportunities to save money by bulkbuying of non-perishables.

� Keep 3 to 6 months of living expenses in an emergency fund at all times. Itcan be used in case of job loss, unexpected illness, or to meet otheremergency needs. An emergency fund will reduce your anxiety.

� Find savings products that match your savings goals.

� Keep emergency funds in a separate account. Open 2 savings accounts—1 foremergencies that is easy to access and doesn’t have any penalties forwithdrawal, and 1 for savings for other goals that is harder to access (andtherefore less tempting to withdraw the money). Keeping some savings“out of reach” is important.

Good savings behavior requires discipline; discipline is learnedthrough practice!


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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 householdsmanage risk, deal with emergencies, smooth income, build assets, and meetfinancial goals. People save by putting money aside when it comes in and byspending less when it goes out.

Reasons to Save

“… there are many times when poor people need sums of money that are biggerthan 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, fromemergency situations, and from the discovery of opportunities to makeinvestments in assets or businesses. The only reliable and sustainable way theycan obtain these sums is to build them, somehow or other, from their savings…”1

You can use savings to meet both expected and unexpected needs. They help tosmooth cash flow, allow for optional expenditures, and invest in assets andbusinesses. In case of emergencies and crises, savings enable you to respondimmediately and, over time, recover from related loss of income or property.

Savings play a key role in meeting financial goals. These can include short-termgoals (weeks or months) such as buying stock for a business or paying schoolfees; medium-term goals (1–3 years) such as home improvement expenses or avisit to the family; or long-term goals (over three years), such as to buy ahouse or save for retirement.

Savings:You Can Do It!

CONTENT NOTE

1

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1Rutherford, Stuart, The Poor and Their Money, Oxford University Press: New Delhi, India,2000, p.1.

Ways to Save

“Managing money well begins with hanging on to what you have. This meansavoiding unnecessary expenditure and then finding a safe place to store whatevermoney is left over. Making that choice—the choice to save rather than toconsume—is 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, orlivestock that can quickly and easily be converted to cash and generally retaintheir value. Land is also an asset in which you can invest and hold yoursavings; it retains its value but is less liquid than livestock.

Informal savings include saving cash at home, which keeps your cash veryaccessible and allows you to avoid the transaction costs associated with savingat formal savings institutions. This form of informal savings has two significantdisadvantages: the temptation to spend the money and the risk of theft. Youneed strong discipline to both avoid spending these savings yourself and denythe pleas of other family members. Furthermore, money saved at home does notearn 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 savingsmechanisms, including rotating credit and savings associations (ROSCAs),village banks, solidarity groups and self-help groups. Familiar and simple, thegroup mechanism encourages discipline, scrutiny and support among members.The advantage of ROSCAs is that each member receives a lump sum of money atone time, with no loan or interest payments. However, a correspondinglimitation is that members typically do not earn interest on money they havesaved. Members of self-help groups borrow from their collective savings withthe obligation to repay with interest, but they also receive periodic dividends.Limitations of group savings include instability of the groups, disagreementsamong members, and limited access to funds.

Formal savings involve financial institutions, including banks, credit unions,cooperatives, post offices or microfinance institutions, and offer another widelyused option for saving cash. Savings in these financial institutions aregenerally safe and earn interest. They offer a range of savings accountstailored to different financial needs. However, the requirements for openingand maintaining an account such as minimum deposits, user fees, and


2

2Rutherford, Stuart, The Poor and Their Money, Oxford University Press: New Delhi, India,2000, p.2.

withdrawal requirements can be costly. These requirements are challenging ifyou make small, frequent deposits or withdrawals. Limited bank hours maymake it difficult for you to access your money quickly in the case ofemergency. Finally, where banks have failed, people tend to lack confidencein them.

Savings Options at Formal Financial Institutions

Formal financial institutions offer a wide variety of savings products. Regularor passbook savings is the most widely used type of account for regulartransactions because the timing and amount of deposits and withdrawals areflexible. Typically, you are allowed a set number of “free” transactions eachmonth, and will be charged a fee for any additional ones. In exchange for theright to make frequent transactions, the bank pays very low interest onpassbook savings accounts. Account transactions are tracked through apassbook, and a minimum deposit is usually required in order to open theaccount. This account is appropriate when you need to make regular depositsand withdrawals, and require easy access to your savings.

Contractual savings are an alternative form of savings that require you todeposit 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 savingsoften is restricted until the contract is fulfilled, and you will be charged apenalty for withdrawing your funds early. This type of account will be useful ifyou have a regular source of income that enables you to meet a commitment tosave at regular intervals for future goals.

Time deposits require a fixed sum to be deposited for a pre-determined amountof time and interest rate. They are not accessible during this period of time, butgenerally yield a higher interest rate than regular or contractual savings. Youmay be interested in this account if you receive a lump sum of money that youdo 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-determinedamount of time. You choose how long that period will be based on yourestimation of when you might need the money. Time deposits vary from sixmonths to five years, and typically, the longer the time period you choose,the higher the interest rate will be.

RESOURCE MATERIALS: Content Note

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Important Factors for Deciding Where to Save

When deciding where to save, you should consider the following:

� Deposit requirements for the savings account. Is there a minimum depositrequired to open the account? Is there a minimum balance required to keepthe account open? Are small deposits accepted? Can variable sums bedeposited? Can deposits be made frequently? What paperwork is required?

� Terms of use. Is the saving program compulsory or voluntary? Do you haveto commit to saving a set amount at regular intervals or over a certain timeperiod? Are there rules about how much you must deposit and when? Arethere rules about how much you are allowed to withdraw and when? Canyou withdraw the money at any time without penalty?

� Cost. What fees are charged for deposits, withdrawals, or passbooks? Someforms of saving may lose value during times of inflation or economicinstability. You need to consider such costs even though they do not involvepayment of actual fees.

� Access/Ease of use. Is the account convenient? What are the institution’shours of operation? Is it open at convenient times? How far is theinstitution from your home or workplace? Are transactions quick andconfidential? What is the quality of customer service? Is the atmospherecomfortable and friendly? Are there long lines at the teller windows? Isinformation 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?

� Safety. What is the reputation of the institution? Does it have insuranceor other guarantees to safeguard funds? Are the telephone or electronictransactions safe? Is the bank or its branch located in a safe neighborhoodlocation?

� Liquidity. How easy is it to withdraw funds from the account? Will the fullamount be available? Are fees charged if the funds are withdrawn before aspecified date?

� Interest. Will your savings earn interest? If so, how much? How and when isthe interest paid? What is the difference in interest rates earned acrossdifferent types of savings products or plans?


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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 outlinedbelow:

1. Set savings goals.

2. Figure out how much you need to save over what period of time to meetyour 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 ona 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 savingsproducts, and their pros and cons.

6. Plan how much and how often you will save. For example, you could put aspecified amount aside in an envelope when you are paid or at the end ofeach business day and keep it in a safe place until you are able to take it tothe bank. Go to the bank on a set day of the week or month. If you are awage earner and your employer is linked to a bank, consider a deductionfrom your paycheck that is automatically deposited into your savingsaccount.

7. Keep track of your savings. Monitor progress towards your savings target ona regular basis by checking the amount you have saved and how close youare to your goal. Check bank statements, passbooks, or other sources ofinformation on your savings.


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Rules of Thumb for Savings

While basic principles of money management can apply to everyone, decisionsto 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 aboutsavings and consumption.3

� Save as much as you can as soon as you can. The more you save, the betteroff you’ll be.

� Save as you earn.

� Try to save 10% of your income even if you don’t have a specific purchase orinvestment for which you are saving.

� Pay yourself first—put 10% of your earnings aside for savings before you doanything else. If you can’t afford 10% right away, start with less, but savesomething.

� Calculate how your money can grow over time if you save regularly in anaccount that earns interest.

� Don’t carry a lot of cash—avoid temptation to spend it!

� Spend carefully. If you purchase big items, consider how much you couldresell them for. Look for opportunities to save money by bulk buying of non-perishables.

� Pay off your debts. Some people recommend paying down your debt beforeyou start to save; others recommend saving even while paying down debtbecause it is important to begin building assets as soon as possible. Thischoice will depend on individual priorities, situation, and means. Totalhousehold debt should not exceed 36% of household income.

� Keep three to six months of living expenses in an emergency fund at alltimes. It can be used in case of job loss, unexpected illness, and to meetother emergency needs. An emergency fund will reduce your anxiety.

� Keep emergency funds in a separate account. Open two savings accounts—one for emergencies that is easy to access and doesn’t have any penalties forwithdrawal, and one for savings for other goals that is harder to access (andtherefore less tempting to withdraw the money). Keeping some savings “outof reach” is important.

� Find savings products that match your savings goals.

Good savings behavior requires discipline; discipline is learnedthrough practice!


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3Researchers 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 andWinter, 1999).

References

Godfrey, Neale, S., and Carolina Edwards, Money Doesn’t Grow on Trees. Aparent’s guide to raising financially responsible children, Children’s FinancialNetwork/Fireside, NY, 1994.

Hirschland, Madeline, “Guidelines for Developing Microsavings Services: A DeskReview for Freedom from Hunger,” Report to Freedom from Hunger, CA, July2000.

Manje, Lemmy and Craig Churchill, “The Demand for Risk-managing FinancialServices in Low-income Communities: Evidence from Zambia,” Working paperNo. 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 Servicesfrom Poor Women in Rural Areas The Case of Vietnam,” 23 December 2003.International Labor Organization. Final Report <http://www.micro-finance.org.vn/he%20demand%20for%20risk%20managing%20financial%20services%20from%20poor%20women%20_4_.pdf>, (January 26, 2006).

Pohl, Avis, Less Debt, More Cash. Everywoman’s Money, Alpha Books, NY 2001.

Rodepeter, Ralf and Joachim K. Winter. Rules of thumb in life cycle savingsmodels. University of Manhiem, Germany (draft), October 1999.

Rutherford, Stuart, The Poor and Their Money, Oxford University Press: NewDelhi, India, 2000.

Schiff, Lewis, “Saving during lean times,” The Armchair Millionaire Guide forCutting Back (Web Letter) July 7, 2003, <http://money.cnn.com/2003/07/07/pf/saving/armchair/>, (January 26, 2006).


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FinancialEducationA ROAD MAP FOR THE CURRICULUM

TRAINERS’GUIDES

BUDGETING:Use Money Wisely

Curriculum and Content Note

SAVINGS:You Can Do It!


DEBT MANAGEMENT:Handle with Care


BANK SERVICES:Know Your Options


FINANCIAL NEGOTIATIONS:Communicate with ConfidenceCurriculum and Content Note

TRAININGOF TRAINERSMANUALS

BUDGETING:Use Money Wisely

TOT Manual and Toolkit

SAVINGS:You Can Do It!


DEBT MANAGEMENT:Handle with Care


BANK SERVICES:Know Your Options


FINANCIAL NEGOTIATIONS:Communicate with Confidence


IMPLEMENTATIONGUIDANCE

INTRODUCTION: THE RATIONALEFOR FINANCIAL EDUCATION

MARKET RESEARCHGUIDANCE

OUTCOMES GUIDANCE

ADAPTATION GUIDANCE

ADULT LEARNING PRINCIPLESAND CURRICULUM DESIGNFOR FINANCIAL EDUCATION

Working PapersMARKET RESEARCH FORFINANCIAL EDUCATION

ASSESSING THE OUTCOMES OFFINANCIAL EDUCATION

Documents

Savings Trainer's Guide