Savings: a bigger problem than foreclosures

| 29/06/2018 | 33 Comments

Cayman News ServiceJH writes: There is a much larger problem in this economy which plays a huge part in the economic circumstances faced by the Caymanian populace at large. This issue has never been discussed, and while there are many factors involved, I will just summarise it by saying lack of savings instruments in the financial system that pay a decent return. There has never been a drive to encourage savings either by the government or the financial sectors; of course we have the Credit Union, a mechanism for civil servants and their next of kin.

This lack of savings facilities creates a great imbalance in people’s lives: we borrow at high rates; when we save it’s at extremely low rates of return; the market for savings investments is geared to a clientele who can afford minimums of $5,000  and upwards. A high cost of services and goods is also a major factor that inhibits any type of savings by the average Caymanian.

This is directly opposite and in sharp contrast to the expat labourer, who sacrifices front-end by sharing accommodations but gains from the foreign exchange, repatriates their funds and is able to save and build homes and establish businesses back home. One may argue that they do this on a low wage scale, but they are used to that in many cases, whereas Caymanians in fact are paying for their usage of the infrastructure as well as their own on wages that are also minimum, and on wage scales which have not moved with increased costs.

Our government seems to be rapidly moving towards what in some cases is referred to as providing further means for Caymanians to be employed at all levels of the work spectrum, and rightly so. However, we must also address an equally important and present imbalance in our ability to create wealth. It makes no sense to create jobs, with high costs of living and not provide the means for long-term self-sufficiency outside of the paltry mechanisms in place for retirement. A nation that saves is a nation that can care and provide for itself.

This comment was in response to MLA’s mortgage solution not on LA agenda

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Category: Banking & money, Business, Viewpoint

Comments (33)

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  1. Anonymous says:

    What I’m a bit surprised at is that none of the posts here refers to the unfairness of the local banks. Prime rate has moved up over the past several months by .25 percent yet, savings and fixed deposits have noted moved upwards less than 0.50%. Why is that?

    • Anonymous says:

      What’s unfair about savings rates increasing more than borrowing rates? Suspect you meant to say the opposite; if you did, Google maturity transformation.

  2. Anonymous says:

    Waiting on certain MLAs to push for a policy to take the savings from those that saved and force them to give a %age to the ones that haven’t.

    • JH says:

      Well as I thought , there arevvarying opinions and thoughts on this subject. However, the fact still remains whether you are local or expat whether your wage is high or low the Objective most people seek is not just to make money but to have a net savings for emergencies or for future investment be it retirement or whatever.

      The fact still remains that we alla we are hard pressed to save in an environment where your Hard earnings are consumed by high costs and even if you are frugal in your spending you are not able and/or encouraged to save because of a lack of savings instruments available and geared to help you grow. That is a fact that cannot be denied no matter what arguments are brought to bear as to who is responsible or not.

  3. Anonymous says:

    People are more stupid and are capable of exerting less self-control than they think.

  4. Anonymous says:

    Story A: One of my children comes from SE Asia he is paid 1600 per month and has a house worth US$ 20,000. Modern 2 bed 1 bath on a small lot completely fenced. Modern kitchen with tray ceilings. He is paying for 8 years CI$200 per month. He has been here 12 years. He got a raise after working for 10 years, he started at $1000 per month. He works 6 days a week and makes a total of CI$2000 per month. His savings for 12 years in his pension is 15,000 CI. Wow big savings, but at least he is buying a beautiful home.
    Story2: One of my children born here works in Government made up to $2600 per month. Married with 2 kids bought an apt and pays $900 per month. He divorced and pays child support which pays his ex $800 per month. He has no home now and shares a room with a friend. Sad but we pay for choices we make. But his pension is $80,000 and has a saving credit union of CI$20,000.
    They both have cars. Tell me why they can’t have a larger savings? Does anyone think that minimum wage shouldn’t be raised? Well then cut the high cost of living. Then everyone will be able to retire at 65. Cause it will never work.

    • Anonymous says:

      Minimum wage is just going to drive the prices up and cause inflation. Certain jobs just don’t pay as much because there is supply and demand and there is just the reality that some people are not willing to pay as much for something as they would for something else.

      If you are uneducated and work an unskilled job, you will get paid less than someone who went to school and works high skill levels roles. The flip to that is if you invented something valuable, patented something, married rich/inherited or got plain lucky in life.

      Unskilled jobs aren’t meant to be long term roles. They are meant as stepping stones and there shouldn’t be a shortage of finding people willing to work these unskilled jobs. It makes people lazy to think they should be entitled to more pay because they cannot afford luxuries in life.

      Cayman imports everything and the cost of living will always be high. Don’t make it worse by increasing the minimum wage. It helps no locals. Just the low skilled imported labor.

  5. Anonymous says:

    An interesting angle and take on things.

    I often find that the “system” isn’t designed to help savings. It is designed to create consumption and employment. For example, there should be one large pension fund with self directed elections. Instead, we are forced to go into smaller funds with higher administration costs.

    It continues, closer to home where to withdraw the funds from a pension the funds up ro $35,000.00 requires that you take a loan. The rational has a purpose but wouldn’t it be better if you could simply use that also to purchase a land when combined with other savings.

    Health insurance, another mandatory system which the CIG just recently stepped back from for business licensing. Again, one provider with maximum flexibility so as to allow people to select what amount of insurance they can afford with limits starting at $10,000.00 to 5 million.

    Life Insurance…way overpriced. Again, single provider could do cheaper under regulation

  6. Anonymous says:

    Yes I know that some people do fall on hard times and I hope thing will get better for them. Just saying, as a 55 year old Caymanian my parents built a home never went to the bank to borrow a dime, raised 6 children who are very successful. Look around at all the old 40 + year homes see for yourselves ask your neighbours how the older Caymanians did it. The simple answer is commonsense, hard work, lived within their means and taught their children the importance of not following the masses. Today very few people will lift a block to help themselves to lower the cost of building their home, they drive around in expensive cars/trucks that they can do without, pay for exercise classes, have maids and gardeners and wonder why they are always living paycheck to paycheck, while the family waste the week end away. There is an old saying ” by the sweat of your brow you shall eat bread.”.

    • Anonymous says:

      As someone who is more than willing to put in manual labor but has no experience in construction, however would you suggest I lend a hand to whomever I contract to build my house

      I specialize in something other than construction. So while I’ll gladly help out, I want to make sure that I’m not giving help for free while still paying full price.

  7. Overspending says:

    Interesting article and comments.
    One of our main problems as Caymanians we have always wanted to keep up with the Jones, we have to have the best of everything even if we don’t need it, take for examples, cellphones, everytime a new phone comes out I see slot of younger Caymanians with them, we also have to change our cars ever couple of years because our neighbor or friends hot a new one.
    As for travelling, a majority of us over spend, we hit the US, Target, Walmart and other stores and have to buy everything because it’s cheaper.
    We never ask ourselves do we really need these material things, we buy them because we can at the time.
    As for persons saying our politicians should help us save, Why? If you can’t save it’s not governments fault is your fault.
    Yes it is hard to save, Cayman isn’t cheap but we as citizens demand the best, we could live in other countries pay taxes, live in wooden homes.
    Looking at the expat situation, it’s basically the same all over the world, slot of people leave their country to work elsewhere, in a majority of cases sent money aside to send home to families and pay off homes, educate their kids, because we have what we have, alot of us aren’t will to venture away from Cayman because we know we have an overall better standard of living here, even though we don’t save.
    I don’t have a real solution but maybe we have to start educating our kids that not to Be entitled and show them how to save and invest whateveronies they may have properly. I have also spoilt my child who is now in his teens and now am having to educate him that he can’t get whatever he wants and we only need to buy what we really need, it has been difficult and I wish I had done this when he was younger.
    About 5 years ago, we started to add additional funds to our morgage and car payment, I now own my car and have cut our mortgage down alot, we also don’t go away as much and have also cut our spendings, we do have a couple of stsycastays now when local hotels have deals. We set aside what we would have spent on airlines, accomidations for a week, plus our spendings money on shopping, food and rental car, which isn’t alot but we have now saved about 25k over the last 5yrs, which it’s that much but we are saving. Back to staycations, out chold loves it because when we go overseas we never stay in nice hotels, here getting residents rates depending on the time of year can be as little as $50 per night and we feel that we have left the island.
    Hope I haven’t bored you, but we can do it, we just have to prioritize what is important now and how we would like to live in the future.

  8. Anonymous says:

    “Caymanians in fact are paying for their usage of the infrastructure as well as their own”

    I think you are suggesting that expats don’t pay for infrastructure.

    The truth is expats pay for infrastructure but in many cases do not use it. An example of this would be the prison. I think statistics show that the prison population is 90% Caymanian even though Caymanians do not represent 90% of the residents living in Cayman.
    Expats cannot send their children to public schools even though they receive no duty or fee rebate or any form of relief in exchange for being excluded.
    Non-Caymanians cannot vote, yet duties and fees collected from expats, in part, pays for the government.

    I’m not complaining, just stating facts.

    • Anonymous says:

      Not to mention work permit fees

    • Anonymous says:

      You have described nearly every single country in the world. Why do you feel Cayman should be any different?

      • Anonymous says:

        If you mean expats do in fact pay for infrastructure then I will agree. If you mean expats are excluded in most host countries from attending public schools then I’ll disagree. If you mean most other countries have an expat population that approaches 50% of the resident population but only represents 10% of the prison population then I would again disagree. Name one. If you mean expats in most countries are not eligible to vote then I will again agree.

        The author of the post had suggested that expats don’t pay for infrastructure. That’s simply not true.

        I never suggested it should change, in fact I said I was not complaining.

        Again, just stating facts, it’s not my faulty if you have a guilty conscience.

      • Anonymous says:

        That is SO very untrue. You have no idea what you are talking about.

  9. Debbie does Dullards says:

    If the banks would make it easy for people to save people would. You have to stand on your head or fly to the moon before banks will allow anyone to open new accounts. They want all sorts of information from you. Screw the banks
    People will get along just fine on cash.
    It ought to be easy here in our island of Cayman to open a simple savings account.

    • Anonymous says:

      If you are too lazy to go through the process of opening a simple savings account you are not mature or responsible enough to take out a mortgage. Do you really think the wealthy have gotten where they are because everything was easy? What happens to people like you? One little hiccup and you give up. And you wonder why everyone else is surpassing you in life. Stop whining!

    • Anonymous says:

      The problem is not the paper work, the problem is that unless you are starting with over $100,000 the interest earned on any saving is minimal ( less than 1%) Hence anyone who have access to the cicsa credit union or other credit unions try to make something work becaus that is the only way to get any return.

    • Anonymous says:

      Living within one’s means takes discipline. Banks are predators, not your financial partners. Credit card balances at 18-22% are paralytic for most households. Pay down the expanding cycle of household debt and cut them up! Term deposits and savings accounts barely earn anything, so forget those. Without hard assets, or other gains and/or income – pref via rental property and/or a managed securities portfolio, you’re not going to get to the promised land of financial independence. Some of the biggest lifetime gains come down to good choices and extra teaspoons of timing and luck from education and relationships.

  10. Anonymous says:

    This is a very interesting comment and I absolutely agree that it wholeheartedly deserves its own space, but let us back up for a minute here as the writer has made the comparison between ex-pats on low incomes who are able to save and Caymanians who seem to be unable to do so.

    An expat who comes here and earns a low wage prioritises how that money will be spent. Yes, they benefit from the rate of exchange but the writer forgets that the one income that the expat earns has to cover 2 homes (the one here that is being shared) and the one in the expat’s home country where they have families to support. It therefore does not matter what the rate of exchange is in the home country. Its the same fixed salary.

    Caymanians on the other hand don’t have that challenge. The challenge that Caymanians have is that this is their home. This is where their interests are vested and so they spend accordingly. Ex-pats know that their time here in the beautiful Cayman Islands is limited to the next work permit and so they plan accordingly.

    I don’t know what the solution is but the writer is correct that at some point Caymanians needs to start thinking about savings. Ex-pats are forced to set aside 5% of their salary as pension contributions. Caymanians have the same requirements, except that Caymanians can access their pension contributions to assist them in purchasing a home. Ex-pats if they require a home, whether in this country or in their home countries, know that they need to have equity, whether it is 5 or 10% of the value of their home.

    Politicians have done a great disservice to Caymanians. They have not told them the truth when it comes to home ownership and planning ahead for tomorrow. They have told generations of Caymanians that this is their home and they are entitled to the benefits that this country has to offer (nothing wrong with that), but they have also not told them the disadvantages of getting those benefits. Maybe as part of the conversation that needs to be had with our people is the fact that we need to provide them with sound and proper financial advice and planning.

    • Anonymous says:

      11:59 I give you an A for that response. Absolutely right. There are examples of yesterdays politicians and unfortunately too many of todays politicians who perpetuate the same disservice to our people. Good advice is like bitter medicine to too many people and while too many politicians simply don’t have a clue themselves, some know better and prefer to give sugar instead. That is called populism and while it is good for votes today it is destructive to societies in the long run and gets clowns elected rather than capable diligent representatives.

    • Anonymous says:

      Why expect politicians to teach you to plan ahead and save some money? Get your act together and stop making stupid choices. None of this is hard to figure out, but a little self discipline is needed.

    • Anonymous says:

      Why is being a “responsible grown-up” the gov’ts job?!?

  11. Anonymous says:

    I agree with the poster. This is an issue as most people live pay check to paycheck. The fact that salaries have not been consistently rising with cost of living is the problem. There is a huge salary gap between expat professionals vs. Cayman professionals. Until that gap is closed no matter how much jobs are created, most Caymanians will be in the very same position they are in today. Please lets no throw around the myth of Caymanians living within your means. its easy to say that when you have been granted raises and make twice as much as most Caymanians.

    • Anonymous says:

      I do not think you are correct. I think that if most “paycheck to paycheck” person’s salary was doubled I am willing to bet that in 6 months that same person would be living in the same situation. I am a Caymanian and I have always lived within my means AND SAVED. Plus I paid off my mortgage. It takes a lot of discipline.

      • Anonymous says:

        I am also willing to bet that you make more that KYD$2500 per month, and your opinion still has nothing to do with the fact that there is a large salary gap. Are you saying that because you think they will be in the same situation within six months, they do not deserve to be paid in line with others?

    • Anonymous says:

      A very good topic marred by this ‘them vs us’ attitude. If you could take your blinkers off for one second you will see that we have every opportunity to further ourselves if you have the necessary drive and ambition rather than expecting hand-outs and a free run to the top.

    • john lin says:

      The law firms here have a choice between someone with a law degree from Oxford University or UCCI.
      Be honest. Who would you pick? Who would you pay more?
      The answer is a better, more generous system of scholarships for our best students to study abroad.

      • Anonymous says:

        Can’t remember the last time I saw a [major law firm] website profile with Oxford or Cambridge on it for anyone under 40. Aussies, Kiwis and Saffas don’t go to these institutions. They go to Witwatersrand or Auckland or New South Wales, put in a few years at a national or provincial firm (always ‘handling heavy commercial matters’ or ‘practising high-value commercial disputes’), and then leapfrog the Caymanians who went to better universities actually in the UK, trained here, have years of experience in the market behind their desks doing the work here, and these expats get hired by people who followed the same paths as they are seeking to follow here.

        University name and rapport with hiring people hides very average abilities. There is a small army of nobodies lacking charisma, personality or potential outside the institutionalised worlds of these firms. They make zero self-directed impact on society beyond paying the private equity owners of hotels for brunches (spare me the crap about fees – they’re pocket change to these guys, as they’ll arrogantly tell you). When they get bored of insulting our politicians and talking about what a dump Cayman is while inviting their parents down for month-long holidays they take the same show somewhere else. I know these guys; they don’t care where they’re working as long as they can complain about everything and make lots of money. They think the world is borderless and everywhere should welcome their annual billings with a parade and grant them keys to the city. They’re exactly the sort of people we implemented rollover to keep out of our society.

        • Anonymous says:

          Wow. How are you able to walk around with that humungous chip on your shoulder? Are you on disability?

        • Anonymous says:

          Why make this stuff up? I’m not a lawyer but even I can think of 4 at one firm alone without trying.

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