In Nigeria, having children is a deliberate investment strategy, evident at times in the names given to children. When it comes to retirement planning, both parents and children know their roles are going to switch. One cannot completely knock this system as it has played its part in supporting the older generation in the country. But it is time to consider alternatives.
According to the National Bureau of Statistics, of a working population of 69 million people, just about 10% have a retirement savings account (RSA). The data also shows that take-up is particularly low for women and individuals over the age of 60.
In our parents' defence, as a developing country, the retirement planning/pension structure is far from efficient. But if the issue was a lack of trust in the Nigerian pension structure, we should at least see an impact in alternative savings vehicles like savings deposits. Instead, savings as a percentage of GDP has rarely crossed 30% in the last 30 years.
So how is Nigeria's adult population preparing for retirement?
For parents that want to prepare for life after retirement, two issues hamper their ability to do so. The first is the paucity of student loan or education funding options that would ease the burden of funding their children's higher education. The second is Nigeria's chronic underemployment problem. Another NBS report suggests that nearly half of the youth labour force is underemployed. If you are familiar with Nigeria, you will know that "youth" includes those up to age 39. The inability of this demographic group to fend for themselves delays their parents from planning for retirement. In the system we are used to, our parents care for us until we are independent, and we in turn care for them in retirement, it worked just fine.
So if it isn’t broke, why fix it?
Well because it is about to be broken. Young parents can often be found lamenting the increasing cost of raising a child. Today, ₦1 million may not get your child into that high performing secondary school, and even crèche fees can run into hundreds of thousands. And not all of this is down to inflation. As the sandwich generation juggle raising kids with taking care of their ageing parents, the needs of ageing parents might just take a back seat.
To bolster this point, it is important to note that Nigeria’s age dependency ratio in 2015 was a stunning 88%. This means there were 88 dependents – children and ageing adults – for every hundred people in the working population. Although children might desire to help their parents out, what we need to question is the ability to do so to their parents' satisfaction without neglecting the needs of their newly formed family.
It might be too late for the parents of millennials, but millennials themselves necessarily have to put a strong focus on retirement planning. Unlike their parents, millennials are likely to have fewer children, meaning fewer people to act as caretakers in old age. The fertility rate has dropped by 1.13 points and the expectation is that this number will fall further as the cost of raising children continues to rise.
Away from the argument of ability
Many adults place great emphasis on retirement planning because of their determination to hold on to their dignity in old age. I'm not sure if the phrase "he who holds the cheque has the say" is a saying; if it isn’t already, you heard it here first. To remain an independent adult able to make independent decisions, the millennial will have to take planning for retirement seriously. Moreover, only a retiring individual truly knows how they want to live in retirement. And only they can truly incorporate that into their financial planning as soon as they start earning. In order for parents to live how they want in retirement, without owing anyone (or child) an explanation, it is imperative that they strive to achieve lifetime financial independence.
The onus is on parents
Unlike how it has been in the past, savings have to be geared up at an accelerated rate. As parents increase savings and investment, it is also very important to demand responsibility from their children. Although our issues are not exactly the same as that of those in developed countries, children ruining their parents’ chance at retiring comfortably is not a problem specific to Nigeria.
Demanding such responsibility would entail, for instance, expecting those kids sent to study abroad to contribute to paying off whatever loan was taken out to send them to such universities when they become employed.
As much as parents love their kids they will need to start prioritising their future self. It simply makes sense for our parents' to develop a more sustainable retirement plan.