You too can be a saver

Saving. Saving. Saving. One of the daunting words we are thrown at every now and then. On paper, saving seems pretty straightforward until the rubber meets the road and we realize it could be in the neighborhood of rocket science.

See, saving money is one of the fundamentals of personal and business finance. Everything revolves around saving but none of us are or were intentionally taught on how to save. If you look at the Kenyan curriculum, personal finance only gets a brief and dishonorable mention.

According to a World Bank report, Kenya has one of the poorest savings cultures in Africa. In 2015, the country’s gross national savings stood at a desolate 12.7 per cent of the GDP, well below the continent’s average of 14.7 per cent for similar sized economies.

The benefits of saving are diverse and one key reason to save is to cushion yourself during emergencies. Savings also have the advantage of granting financial freedom through reduction or aversion of debt entirely. It helps you avoid borrowing since you have your own reservoir. Others have benefited from taking on risky investments all courtesy of the freedom savings granted them.

Whereas we agree a good saving strategy is a journey as opposed to a destination, we do believe the following tips could be a great step both from a personal and business point of view, when it comes to saving.

Budget. Budget. Budget.

As cliché as it may always sound, failing to plan is always planning to fail. A good method to work with would be 50/20/30 method. This method suggests that fifty percent of your money should be set aside for living expenses like rent, food, transportation twenty percent should go to your financial goals like savings, investments and debt-reduction payments. The rest which thirty percent should be dedicated to non-essentials like movies, lunch dates , holiday and entertainment in general.

The best way to make this work is by having an accountability system that lets you log in and track your expenses. Some of the customer-savvy banks have this feature in their mobile apps.

Re-evaluate your utility bills

From the numerous subscriptions you have, to the type of electricity metre you have, to the area you live. Evaluating your monthly bills, how necessary they are is very important. This and cost cutting will help you turn the difference into worthwhile savings. You’ll be surprised majority of the wants are just unnecessary expenses.

Negotiate with vendors

Your local vendor’s price is not necessarily fixed. Many of them are considerate when it comes to a fair discount. Many would rather negotiate than lose a loyal customer.

So, the next time you are in contact, bring it up and you will be most likely be able to shake hands on a mutually beneficial deal. The discount might not look substantial but in the long run every cent counts towards your savings.

Adopt a thrifty mindset

Thrifting has always been part of Kenyan culture. Buying a quality used product may serve you just as well as a new ones. Furthermore, you could end up with unique fashion pieces, one of a kind furniture from a flea market and even distinct cutlery, plus your savings will thank you later.

Save and invest

Don’t just save, invest as well. Money just like any other commodity, will eventually be affected by inflation. Saving in itself is not inferior to investing but investing offers you longer term returns. However, investing would be the better option to go for- because savings enables you to retain your principle amount while investing it adds on to the principle through interest earned.

ICEA LION’s Money Market Fund can be the perfect plan to start with as you seek to move into more aggressive investments later on- this is because a Money Market Fund is a low-risk investment with an element of guaranteed return. These
investments mainly include interest-bearing assets like fixed deposits, treasury bills, short-term bonds and so on.

The table below summarizes other investment options. They are divided into two. Mainly short-term and long-term.

LONG TERM SHORT TERM
Unit Trust funds Money Market funds
Bonds Treasury Bills
Shares Short term bank Fixed/call deposits
Fixed deposits Bank savings accounts
Life Insurance policies Commercial Paper
Real Estate Short term Bonds
Retirement Funds

Got any questions on savings? Talk to us today on 0719 071 999 or email us on contactcentre@icealion.com or unit-trusts@icealion.com to find out how you can grow your wealth.