Money cushion – call of the times
By Nigar Orujova
Changes in the global economy now affect each and everyone around the world. Some people decide to save money just in case, while others either cannot afford to save or believe that they are immune from these trends.
Saving money is the surest way to protect oneself from unexpected employment job loss, sudden health problems, or economic changes. Some experts even advise citizens to save enough to survive for half year without employment.
Sustainable Development Research Center Chairman Nariman Agayev told local media outlets that Azerbaijanis are naturally inclined to save money for a “rainy day”.
He believes that a little less than a quarter of the population has savings as a “safety cushion” for unexpected problems.
The older generation is worried about the future, while young people prefer to live carelessly, the expert said. Moreover, youngsters recently entering their adult lives tend to make much less and don’t think a lot about their futures.
Another noticeable fact is that most of the citizens with adequate savings are residents of the capital city.
“The most surprising, if we take into account ordinary citizens, is that people living in harsh climatic and social conditions think about the future more than those who used to live in a grand style,” the expert said.
Meanwhile, the average salary in Azerbaijan this year grew and employment rates in the economy have stopped sliding, the State Statistics Committee reports.
The average salary in Azerbaijan reached 454.8 manat ($433) as of June 1, compared with 452.5 manat ($431) on May 1, 449.5 manat ($428) on April 1, and 444.3 manat ($423) at the beginning of the year.
Experts believe from this perspective, people can save up for a decent “safety cushion” in two and a half years by saving 10 percent of their salaries.
The money should be saved in such a way that it will not only be an effective tool in case of unexpected difficulties, but can also be used in the future to gain more profit.
Enlarge saved money
When the “safety cushion” increases, it is reasonable to double the money. In Azerbaijan, this can be made in a different way.
Bank deposit is the most popular and one of the safest ways. There are 43 banks in the country and most of them provide an opportunity to open a deposit account with an interest rate at 9-16 percent per annum.
The key advantage is that deposits up to 30,000 manat are (about $28,570) insured by Azerbaijan Deposit Insurance Fund. However, this only applies to deposits of which the interest rate of which is equal to 12 percent or less.
Thus, people need to decide which is more important: higher incomes or safe deposit.
Citizens should remember, however, that to get the highest interest on deposits, the money must remain untouched for a period one year or more. That is, if the client wants to withdraw funds from the account before the agreed-upon date, he or she will likely remain without profit or even have to pay a fine.
Those who want to decide when to take profits from their savings should refer to another traditional investment project – real estate. However, experts believe, that this year is not profitable for this sphere and advise to wait until the next year due to unstable prices in the market.
A less popular option for investments are securities, however it is not for everyone, as the securities market requires special skills.
Those, whose “safety cushion” is not yet mature can enjoy the opportunity of cumulative life insurance. There are three insurance companies that provide life insurance in Azerbaijan: PASHA Life, Ateshgah Life and Qala Life.
Investment principles are as follows: the customer pays a monthly minimum of 100 manat ($ 95) to the insurance company. The minimum term of the contract for life insurance policy is three years, after which the client receives the money deposited and the profit, which depends on the size of the income tax.
By this way or another, saving money today is always a plusno matter how stable the economy of the country.
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Nigar Orujova is AzerNews’s staff journalist, follow her on Twitter: @o_nigar
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