Finance Minister to public servants – Save some back pay for rainy days

Finance Minister Davendranath Tancoo. -

Minister of Finance Davendranath Tancoo is encouraging public servants to save as much as possible as they get their back pay.

Speaking to Newsday via phone on December 20, Tancoo said, “I’m hoping members of the PSA who received their partial back pay will be reviewing their financial status and making sure they save some for rainy days. Prices are going up, etc. Anybody who gets extra income, whether by gambling or by benefits via negotiations for wages and salaries, should be looking to save a substantial part of their money for retirement or for future generations.”

On December 2, the Public Service Association (PSA) and Chief Personnel Officer (CPO) Dr Daryl Dindial signed a memorandum of agreement listing the conditions of the agreement, which included a ten per cent wage increase, new salaries in January and an advance on arrears on or before December 23.

The CPO said that the back pay, amounting to $3.8 billion, would not be paid in full, would not all be in cash and may not be paid in a single financial year. He said the payment on December 23 would be an “advance, flat-rate payment in lieu of arrears,” which would be no more than $500 million paid out to the PSA’s 80,000 members by Christmas.

Advice from experts

Ian Chinapoo, Group CEO of Guardian Group, financial expert of 30 years and proud son of two long-standing retired public servants, shared some practical advice he described as The 4T’s:

Guardian Holdings Ltd CEO Ian Chinapoo -

1) Take a deep breath.

Stay calm and focused. Do not let emotions run away with you, and avoid any actions that feed those "feel good" emotions (for example, partying or lending to family or friends). Do not go out and charge up your credit or debit cards on fancy purchases.

2) Think out loud and write.

Apply the 50/50 mindset – save 50 per cent, spend 50 per cent. For the spending portion, make a list of all bills and loans outstanding, credit cards, salary advances, car or student loans/school fees, late payments on insurance or utilities, and the like.

3) Tactical Moves.

Prioritise key payments to protect your financial health, like high-interest debt, medical or life insurances that may have lapsed, outstanding mortgage payments or utilities/bills.

4) Target your future.

Make wise investments, ideally no less than 50 per cent of your back pay, to safe and sound investments such as mutual funds, stocks and government bonds that pay dividends or interest quarterly or semi-annually. You can then target up to 50 per cent of that income to spend and the balance to re-invest, thus protecting your back pay "principal" and living better over time!

Expanding further on the topic, president of Guardian Asset Management, Miguel Martinez too warned against spending all back pay at once, saying a lump sum payment could be a great opportunity to start investing meaningfully or to strengthen current investments.

“With the right approach, a one-off payment can become the starting point for building wealth and greater financial confidence over time.”

He said while lump sums could feel separate from one’s regular income, they should be careful about having a “found money” mindset, which could lead to quicker, less considered spending.

Like Chinapoo, he advised splitting the money, but this time between spending, debt and saving.

“Allocate a portion for enjoyment, another toward reducing high-interest debt, and the remainder for saving and investing. This balanced approach allows you to meet today’s needs without sacrificing tomorrow’s stability.”

He also suggested strengthening an emergency fund, which should cover at least six months of income. The fund would provide peace of mind and protect from having to borrow or dip into long-term investments when unexpected expenses arise.

He advised that people move beyond saving and start investing with purpose. Think, not just about the moment, but long term.

“Once immediate needs are covered, investing allows your money to work for you over time. Well-structured investments can help protect against inflation and grow wealth steadily, rather than leaving funds idle in low-interest accounts.

“Investing part of a lump sum can help fund future goals such as retirement, education or home ownership. When used wisely, a one-time payment can create benefits that last for years, not just weeks.”

He said funds needed in the short term should be invested more conservatively. A great way to do so would be mutual funds, as account holders would have access to their money and get a better return than a savings account at the bank.

Money set aside for long-term goals can afford to take on more risk to pursue growth.

“Investing through managed funds provides access to professional oversight, ongoing monitoring and disciplined decision-making, helping investors stay on track even during market uncertainty.

“To make the most of this opportunity, it’s also important to choose the right financial partner. A trusted investment manager can help you understand your options, assess your risk comfort level and align your investments with your financial goals.”

He suggested a financial partner should be an institution with a strong track record, sound governance and a clear investment philosophy. The client should understand how their money is invested, what fees apply and how performance is reported.

“Accessibility also matters – whether through regular communication, digital access to your investments, or the ability to speak with someone when you need guidance. Most importantly, your financial partner should take the time to understand you, offer advice suited to your circumstances, and focus on long-term outcomes rather than short-term gains.”