Rainy day?

Reader question:

Please explain “rainy days” in this headline: “Cash help needed for rainy days.”

My comments:

This means that some people keep running out of cash and therefore need some sort of help, either from banks, employers, governments, family members or relatives.

In other words, they have to borrow cash (to pay for everyday expenses, such as buying groceries).

Anyways, “rainy days” is the metaphor to remember here. They refer to, well, rainy days or inopportune bad weather.

And let me explain.

Presumably this expression is pretty old, ancient in fact, originating from the good old days when we humans were hunter-gatherers.

That is, hunters for meat and gatherers for grains and vegetables.

And when we were hunter-gatherers, we scavenge for food and drink. In other words, life was not settled. Well, settled (in caves and log cabins) perhaps but not as well settled as we are today, with food and drink in the fridge that will last the family a few days up to a week. Back in those days, people led a day to day existence, i.e. they eat their fill when they get food without knowing whether they’ll have the same kind of food (or luck to have any food) tomorrow.

It is from these circumstances that some wise people began to develop the habit of storing food. Not a lot – unlike today’s silly greedy capitalists who keep mountains of un-spendable wealth just to prove they can – just a little to last them a day or two.

This, as we say nowadays, is “saving for a rainy day,” on the simple premise that on rainy days, hunter-gatherers had to stay in doors to keep away from the elements.

Today, we are no longer hunter-gatherers but needless to say, it’s still prudent for people, the young especially, to practice frugality and save a little wherever and whenever they can. With today’s economy and the wage structure being the way it is, i.e. unfavorable to the young who are fresh into the work force, plus young people being young people (who tend to be spendthrifts and lack self discipline) it’s never a bad idea for parents to teach their children a thing or two about “saving for rainy days”.

And yet, parents should never talk too much to their children lest the youngster gets tired of you and tune you out entirely. And so, let’s stop quibbling right here.

Two media examples, though:

1. SINGAPOREANS may be the richest people in the region on a per capita basis but they are financially more insecure than ever, a survey has found.

More Singaporeans now want to set aside money for financial emergencies; as compared to early 2009 when their focus was on saving for retirement.

According to the latest HSBC Asian Insurance Monitor, 69 per cent of Singaporeans cited saving for rainy days as their wealth goal, up from 55 per cent in the first survey. Retirement continues to be important to Singaporeans - with 64 per cent citing this as their financial goal. However, it is now ranked second, from 62 per cent in the first survey.

The findings were taken after 3,563 individuals were polled in seven countries and territories - Singapore, Malaysia, Taiwan, Korea, India, China and Hong Kong - in December 2009. The first survey was conducted in March 2009 and polled 514 Singaporeans. 504 Singaporeans were polled this time.

Only 30 per cent of Singaporeans said they have enough savings. 60 per cent feel they are not saving enough while 11 per cent said that they have no savings. It seems that most Asians have insufficient savings. More than half of people in all the other countries except India feel that they have not saved enough.

- More Singaporeans want to save for a rainy day: survey, AsiaOne.com, January 23, 2010.

2. A fifth of Britons admit to having no savings whatsoever while only just over a third of adults say they have less than £500 put aside for a rainy day, new research reveals today.

The figures from market research consultancy Mintel also show that women are least likely to have that all important nest egg. About 17% men, nearly a quarter (22%) of women and as many as 22% families admit to having no savings at all.

The findings paint a grim picture of millions of households unprotected by even the smallest of financial cushions as they struggle to cope with the everyday cost of living in tough economic conditions. Rising fuel prices and a hike in VAT have made the beginning of 2011 difficult. Increase in inflation is further bad news for savers finding the value of their deposits falling in real terms. The rise in the Consumer Prices Index to 4% in January from 3.7% in December means a basic rate taxpayer now needs to find an account paying at least 5%, just to stop the value of their savings eroding in value.

Toby Clark, head of finance at Mintel, said: “With unemployment continuing to rise and concerns about the health of the economy, those without a safety net could find they are financially exposed in the coming months. The accepted wisdom is that low interest rates are stopping people from saving, however we have found that it is only really an issue for the top end of the market and the reality is that meeting everyday costs and expenses is by far the largest savings barrier.”

When asked how they would generally describe their current financial situation, almost three in 10 consumers (28%) describe their conditions as tight, only just making ends meet. A further one in ten (8%) say they are really struggling, admitting they are in real danger of falling behind with bills or loan repayments. But those in the worst situation are the 4% of Britons who are in real trouble having missed loan repayments or household bills.

The largest proportion (42%) are those who feel that their financial situation is stable, but there is not a lot of money left by the time the basics are taken care of. Just 18% admit to being in a healthy financial position with money left at the end of the month for a few luxuries or to add to their savings.

The strains that the slowdown has put on the nation are showing. Over the past year, half (50%) of consumers have withdrawn from their savings, with lower income groups among the most likely to have taken funds from their savings. Around the same number (53%) admit that they can’t really save or invest at the moment.

For those who are lucky enough to have spare cash, saving rates highly on consumers intentions. When asked what consumers choose to spend extra money on, the top five spending priorities are dining out (35%), savings account/emergency/rainy day fund (33%), going out (pub, cinema etc) (33%), small extras for family members (26%) and books, DVDs and CDs (25%).

However, with savings being eroded by the effects of inflation and taxation, there is little incentive for people to save now. According to Andrew Hagger of Moneynet.co.uk, basic rate taxpayers now need to earn 5% gross on their savings to maintain their spending power - a rate unobtainable on any standard savings account at the moment.

- Fewer Britons saving for a rainy day, Guardian.co.uk, February 16, 2011.

About the author:

Zhang Xin is Trainer at chinadaily.com.cn. He has been with China Daily since 1988, when he graduated from Beijing Foreign Studies University. Write him at: zhangxin@chinadaily.com.cn, or raise a question for potential use in a future column.