Receiving relevant financial information when you need it is the holy grail of financial education. If you can reach people at a time when they need to make important financial decisions, you can guide them to make the best decision for their future. How many people when they receive a tax rebate or a bonus spend it rather than investing it? And how often is that decision based more on a lack of relevant information at the time about the various investment options? The thought of selecting an investment and then filling in all the paperwork is quite frankly overwhelming for most people. Buying something is just so much easier!
The Center for Economic Progress (CEP), a Chicago-based non-profit organisation, has found a way to engage with people when they receive their tax rebate. The organisation offers American taxpayers free advice when filling in their tax return. The US tax system is so complicated that most people – even lower income earners – need a tax consultant to help them with their tax return. By offering free advice, CEP saves the taxpayer money in consulting fees but also assists them in getting their rebate from the taxman. Since 1990 they have helped 400 000 families get back $590 million in tax rebates.
As in South Africa, most Americans get a rebate, but very few actually invest it. So CEP started a “Save Your Rebate” campaign to encourage people not to just spend the money but to invest it – again providing free advice through volunteers.
In South Africa, the Financial Planning Institute (FPI) hosts a financial planning week each year in September, where members offer free financial advice, but CEP ties it in with the tax rebate session – providing help exactly when needed to complete your tax return and then providing the incentive to save at just the right time. They even offer a competition to win a prize if you save your rebate.
Do you even remember what you did with your bonus or tax refund last year or the year before? When you get your next bonus or refund, think about this: if you receive a R10 000 tax refund each year and you invest it rather than spend it, after 20 years it would be worth R800 000 if you received a 12% annual return (the long-term average return of the JSE).
This article first appeared in City Press.