End-of-Year Bonus An Excellent Opportunity to Double Your Savings

When we speak of December, it is all about festivities and in addition, the gift that every employee is waiting for – the bonus. It is not only one of the busiest months of the year but also one that brings the most expenses.

End-of-year bonus, also known as the thirteen month, is equivalent to one-month salary and is normally paid to employees in December, just before Christmas. In Mauritius, payment of the thirteenth month bonus is mandatory by law. Vineet Jugessur, financial expert, provides an insight on how to invest and save your money.

During this month, both the private and public sectors disburse billions of rupees for around 450,000 employees in the private sector and around 83,000 employees in the public sector, including those working in municipalities, district councils and parastatal bodies.

The way people spend their bonuses varies, according to the profile of the persons. For instance, some people choose to spend their 13th month in buying school materials, toys, gifts, renovating the house, staying in a hotel and others use it for trips abroad. But there is also a handful of people who look for investment opportunities. One sure thing is that during this period, demand for goods and services shoots up radically, mainly because people have additional disposable income in hand and suppliers of goods and services do not leave any stoned unturned in attracting potential buyers via strong marketing campaigns. 

Use bonus wisely 

Vineet Jugessur explains that a wise salary earner should always properly plan and budget ahead. “Ideally, it is recommended that 30% of one’s gross monthly income should be stored upfront in a separate interest earning bank account, and day to day living cost (rent, utilities, school fees, food costs, entertainment costs, medical costs) be managed with the remaining 70%. In December, it is an excellent opportunity for the wise to double savings.” 

He lists the following way people should divide their bonus:

1. Prioritise to clear existing debts, this will result in decrease in payment of finance cost or interest.
2. Build up emergency funds/savings.
3. Choose carefully before buying, for instance buy items that would help in earning more in the long term; in technical terms, invest on things that would generate a greater ROI (Return on Investment).
4. Invest in career and personal growth by attending a workshop, attend a motivational seminar to further boost career, participate in a stock market seminar to explore ways of investing in stock markets and yield returns. However, if a person does not understand how a stock market works, it is better not venturing in it.
5. Avoid investing unreasonably in depreciating assets.

Save or invest 

According to the financial experts, consistent and disciplined savings can create life changing opportunities to invest in appreciating assets, for instance acquisition of property and real estate. “At the end of the day, a salary earner receives the thirteenth month bonus after a lot of hard work, hence it is equally important to treat himself/herself as well as his/her dear and close ones, perhaps by going to a holiday spot, or eating at a favourite restaurant. Over time, these appreciating assets have the potential to generate both passive income and capital gains.” Finally, he highlights that it is also good to do some charity. 

Famous saving plans available in Mauritius 

Currently, some of the main investments and saving opportunities include the following:

Education plan

This plan is available in various institutions like MCB, SBM, and SICOM, among others. It is a plan where a family secure their children’s future by investing in this plan. 

Retirement plan

This plan is available at different institutions and is sought by many people today. It is a way to start planning for your retirement. 

Stock Market investment

The stock market is a common way of developing numerous portfolios which suit the needs of these investors. Trading on the Stock Market needs to be done with licensed brokers. 

Saving accounts

Saving Accounts are definitely the most sought-after. For instance, there is the Money Tree, a saving accounts by Bank One offering a rate up to 2.70%. There is also the Fixed Deposit, which is a great way to place your bonus. The rate varies, starting from 2.35%.