In the new year, a savings tip for hired help

It is that time of year when many of us are thinking about Christmas and year-end bonuses for those who help us. Most of us deal with household staff the way Lee Kuan Yew ran Singapore: as a benevolent dictator. We tell them what to do; teach them skills that will improve their work; and try to take care of them and their families. What we don't do is train them on how to improve their own lives; not because we don't want to but because many of us - me included - don't know how to.

In an informal survey that I conducted a year ago, I interviewed about 100 women across five locations: India, the US, the UK, Singapore and Dubai.

These were friends and friends of friends. To all, I sent an e-mail with the above preamble and asked a question: If there was one thing you wish you could do for your household help (maid, chauffeur, gardener, housekeeper, etc.) what would it be? Eighty per cent of the replies talked about savings.

The responses said it in different ways. The Indians wanted to open a bank account for their maid so she could learn to save better. The Singaporeans said their Filipina maids had bank accounts but frittered away their monthly salary on unnecessary impulsive purchases, so they wished they could teach "these girls better financial management".

People in the US and UK said they wished they could teach their helpers "to plan and invest their savings better". Those in Dubai said they wished their staff would send less money home, where it would simply get spent and instead keep it in the UAE so it could be used to their own future advantage.

Based on these responses, I tried something with my cook, driver and housekeeper that I had never done before. It didn't involve filling out forms, or even opening a bank account. All it took was buying a bunch of envelopes.

Some months ago, I had a talk with each of them about financial savings. All three of them have two kids each, no bank account and no savings. During emergencies such as hospital stays, they take an "advance" from me that they repay every month.

I told them that I wanted to help them save for the future. Henceforth, I said, I was going to give them their salaries in two envelopes: one was the spending envelope and the other was the savings one. I took photos of their children and stuck it on the savings envelope.

This money, I said with a dramatic flourish, will be for your children's education and your children's photos will remind you of it. At the end of each month, when I dispensed salaries, I gave each of them both envelopes. You will have access to the money in both envelopes, I said. But try not to touch the savings; try not to open the sealed savings envelope.

Together, we came up with a savings percentage that would work for each of them. My cook, who had several loans to repay, wanted only 10 per cent of her salary to be in the savings envelope.

My housekeeper, an educated woman who gave up her job as a school teacher because she made more as a housekeeper, suggested I put 25 per cent as savings for her children's education.

My driver, who had infants, said - to my surprise - that he had a long horizon since his kids were so young, so he needed to save only 5 per cent of his monthly income. He didn't use these words. He said something like: "Inshallah, my daughters will go to college in 15 years, Madam. why save so much now? Let's start with little."

His comment taught me that people may be uneducated and poor, but that doesn't mean that they don't intuitively grasp sophisticated financial concepts.

Several months later, I am happy to report that none of these three people has touched the savings envelope that has a photograph of their child on it. For this, I have Dilip Soman to thank. Mr Soman is Corus chairman of communication strategy and a professor of marketing at the Rotman School of Management at the University of Toronto.

I have never met Mr Soman, nor have I talked to him. I have, however, followed his research, particularly one concerning 146 construction workers in rural India. In a study called Earmarking and Partitioning: Increasing Saving by Low-income Households that Mr Soman conducted along with his research associate Amar Cheema, they "partitioned" the US$15 (Dh55) weekly wage that these construction workers got into two envelopes. One was "earmarked" as the savings envelope and sealed with a photo of the labourer's child. The other was the spending one. As the research paper says: "The data reveal that households with partitioned savings amounts save more than households whose earmarked savings are not partitioned. Partitioning is more effective when the guilt associated with using the earmarked money for mundane expenses is emphasised by placing pictures of the household's children on the earmarked envelope. This intervention (the presence versus absence of a picture) also decreases the likelihood of a household opening a savings envelope in a given week, especially among those households with low savings targets."

Try it with your staff. Merry Christmas!

Shoba Narayan is a journalist based in Bangalore and the author of Monsoon Diary