The idea of saving is “nice to have”, but is difficult to practice for many of us.
As we navigate the early days of the New Year, this is the perfect time to implement your long-term plan you had postponed to start saving. With accrued debts from previous year(s) and financial challenges that you could have avoided if only you saved a few coins a month, you still have the power to make the next eleven months,if not years, a success.
My relationship with finances is complex. I am still learning to work out how to manage my money in the best way possible. It has taken me several years to learn the discipline of saving when all I want to do is splurge it.
Do you wish to retire young and spend your time doing what you love, relaxing and planning for your next vacation? Is this even doable?
According to the Employment Act 2007, the retirement age for government workers is currently set at 60 and is a legislation of the Public Service Act. For individuals working outside of government, the private sector employers impose retirement laws according to their policies.
But you donot have to wait until you hit ‘retirement age’ to leave work. Start shaping your destiny now by saving regularly today.
What are the saving options available for you?
- a) Deposit accounts
Talk to your bank to gather saving options available for you. You can pick from savings or fixed deposit accounts. Saving with the bank is safe as the returns are guaranteed but could be affected by the current market situations, for instance if the inflation is higher than the interest rates paid.
- b) Financial Markets Instruments
These include Treasury bills and bonds. While banks are safer platforms to save with, they also come with other liabilities such as low interest rates and transaction costs. Thus, it is economically wise to invest your hard-earned money where there are higher returns as well as lower transaction costs for utilizing the available products. Government bonds for example may offer effective saving option for you.
In 2017, the Kenyan Treasury inaugurated a mobile application (M-Akiba) that allows Kenyans to purchase, hold, and trade bonds through their mobile devices. Unlike in the past where buyers were required to make large investments (KSH100,000 or US$1,000), today, with just KSH3,000 (USD$30), you can make your investment, thanks to the 2015 legislation that reviewed the minimum investment in treasury bills downwards. According to an article by a global research center (The Abdul Latif Jameel Poverty Action Lab (J-PAL)the “returns on government infrastructure bonds in Kenya are high —around 12 percent in 2018”).
- c) Mobile Money ‘saving’ applications
M-Shwari lock savings account, a new banking product for M-PESA, is one product that you can rely on if you wish to save a few coins every now and then. The savings account allows its customers to save cash for a particular purpose for a specified period of time.
The best thing about this savings option is that once you lock the investment, you cannot withdraw until maturity. Additionally, you can deposit easily through M-Pesa and there are no monthly fees on this product. According to Safaricom, the interest rate for this product is “7.35% p.a. if money is retained in the account until maturity.”
Whether using the above three options or traditional saving methods, what you need more is to develop a saving discipline that will ensure you stay on course. Below are a few tips on how to do just that:
Automate your saving
While the ultimate goal is to have a saving discipline which wills you to deduct and deposit your earnings into your desired saving option ‘happily’, setting up an automatic transfer between accounts could save you a headache. Ensure that a percentage of your monthly earnings automatically transfers into your savings account. That way, each time you are paid, you don’t have to even think about saving; it is already done for you! In addition to managing your finances, automation adds built-in discipline to your financial life. Furthermore, you will appreciate spending less on things that you donot need.
Make it a challenge
Simple things like brewing your own coffee at home or at work could make a whole difference if you look at the cumulative spending on such undertakings. Challenge yourself to cut out all the unnecessary expenses that you could do on your own. It could start with simple steps such as:
- Preparingfood at home (and taking some as lunch) instead of eating out.
- Postpone or stop buying new clothes for a few months (3-6 months).
- Unsubscribe from online retail shops that you cannot resist.
The challenge is to pick one or more activities that you can do away with or have them at a lower cost.
Get a support system
Over the years, I have come to learn that it is easier to achieve your money goals while working with a partner or in a group. It could just be for accountability purposes or working together towards a common goal- saving.
Your support system could be in the form of a savings group (chama, merry-go-rounds), or a more established organization like a savings Sacco. Do your research; find what best appeals to you.
Set a money objective
If for instance, you are worried about hitting a certain target, make that your goal. The goal could be anything from “future needs”, “Kids fund”, “wedding fund” etc. Then, distribute the challenge across the number of months or years that you wish to achieve this. It can be a long-term goal too.
Setting true goals is like turbocharge to your financial power. Go after your goal with vengeance and the results will amaze you.
Stop lending to friends and family
Lending to friends and family is good but often ends up to be the worst financial decision you ever made. Unless your friends and family respect your financial boundaries, only lend if you don’t expect a refund.
This year learn how to say “No” to those family members and friends who are always looking for you come end month. You can redirect that money to saving, you know.
Reward yourself
Last but not least, do not forget to indulge those odd treats when you get to your goal. It could range from getting a desired item or a meal you have postponed for so long.
In conclusion, if you have not started saving, start today!
Set a goal: how much do you want to save, by what time? Divide the amount across each year or month within the target period and if you wish, you can even make it a weekly or daily saving routine. Then, pick the most ideal saving option thatwill ensure you reach your goal on time.
Have you just gotten your first job? Start saving the very first month you get your salary. If you start saving now you can wade through hard times in the future comfortably.
