For a long time we have been told that cash is king. It was indeed king at one point in the history of the financial system but continuing to believe in that ideal today is foolish. Today, Cash is turning out to be the enemy of the lower income class. Ironically, it seems to be the single most common mode of income and savings for these people.
My experiences so far with members of the working class have shown me how cash has assumed the role of the bane of the uneducated and ill-informed.
Meet Shobha! Housekeeper, Mother, Breadwinner and most importantly a new bank account holder. Till a few days ago, Shobha was completely unaware of the vibrant financial system and the benefits of having a bank account. But now, she is well on her way to saving and investing her income.
Nevertheless, getting here was not easy. Till now, Shobha lived purely on cash. Her monthly income was being used to support her family consisting of her unemployed husband and school-going daughter. She had also taken a Gold Loan a while ago in cash from a local money-lender and was paying interest on it. Lastly of course, there are the usual household expenses. All this is being borne by her modest monthly income. Despite that, She manages to save a small part of it and stores it as cash to meet any future need she may have.
|Daughter’s School Fees||3,000|
|Food and Groceries||2,500|
|Gold Loan Re-Payment||2,000|
|Water, Electricity ,Utilities||1,000|
But cash is cash. It has no value if kept locked away in your cupboard instead of being invested. When I first met her, the biggest challenge was to help her understand that the worst thing to do with her cash savings is to just lock it away. I helped her realize the usefulness of having a bank account. She would earn interest on her deposits and she has options like mutual funds and other schemes to increase her savings over time. Finally she was convinced and agreed to open an account with a local bank. I helped her a bit with the paper work and she finally entered the formal financial system.
Shobha is just one among the millions of the low-income working people in Mumbai trying their best to save their income in the form of cash. They are completely oblivious of the options available to them to enhance their wealth over time through systematic schemes and financial products. The problem is awareness. All these people still believe that bank accounts are for the rich and wealthy. They feel that no bank will open an account with them and that the concept of investing money is not a feasible option for working class people like themselves.
Hopefully, our modest efforts through the MF Project will help break some of the myths these people have and aid them in enhancing their wealth and thereby create meaningful savings.
With people like Shobha forsaking their dependence on cash and moving onto the banking system, the prospects are encouraging. She has already started sharing her new-found knowledge with neighbours, friends and relatives and I have been quite busy helping many of them with their bank account opening forms and formalities.
Finally, change and financial empowerment is coming to the lower income classes. Slowly, but surely.