Kenyan youth have a poor saving culture

Is it possible to save and invest early to avoid old-age poverty? Demographers argue that life probability in Kenya has been on the rise since the year 2000. Kenyans are now living longer after attaining the retirement age of 60.

In a few years, thousands of retirees who are currently in their 40s or 50s will be languishing in old age poverty unless they set aside enough money to sustain themselves.

Saving and investing in their early 20s is still a problem for many youths, especially those from poor backgrounds. This condition has even become worse as a result of the inflationary trends experienced in the economy.

The little that they get from hustling is used for basic needs and taking care of their aging parents. This leaves them with little or no amount to save or invest for the future.

With the proposed amendments seeking to curb the extension of years in service for civil servants past the mandatory retirement age of 60, the majority are going to have little to save and invest because at their prime, they have a lot of responsibilities to cater for.

According to Embakasi Central MP Benjamin Mejjadonk and Bunguma Woman representative Catherine Wambilianga, the amendments are meant to increase opportunities for citizens below the age of 60 and to compel civil servants to retire upon attaining the retirement age.

MPs agreed that this would end recycling and engaging of retired officers at national and county levels on a contract basis on grounds that they offer special skills. The amendment also calls for the timely filling of vacant positions and successive filling.

They unanimously supported this proposed amendment stating that Parliament owes the youth of and should ensure that the government creates employment opportunities.

“Our youth are languishing in poverty due to lack of employment and are vulnerable to all sorts of trickery and exploitation yet we are rewarding retired officers with plum positions”, said Wambilianga.

Reduced hiring

Young people below the age of 29, mainly secondary and college graduates, are the hardest hit by joblessness in an economic setting that is afflicted by reduced hiring on the back of sluggish corporate earnings, according to the report by the Kenya National Bureau of Statistics (KNBS).

The KNBS illustrates that the unemployment rate in Kenya decreased to 4.90 percent in the fourth quarter of 2022 from 5.30 percent in the third quarter of 2022 meaning the savings were reduced. This report is also supported by findings of the Kenya Retirement Benefit Authority [RBA].

According to the report, barely 20 percent of Kenyans save for pension, which means that as life expectancy continues to increase, a large number of people will be unable to escape old age poverty.

The report further states that an average Kenyan spends about 1/3 of his income on rent (specific to urban settlements) and the rest is divided into utilities, house help salaries, transport, Internet costs, phone bills, groceries, tuition, and personal loans.

Before you know it, the person is running at a deficit. With mobile loans being so accessible, the temptation to take them is high, especially on a dry mid-month day.

Poor saving culture

Prof Haron Mwangi, a Senior Lecturer at the Department of Communication and Media Technology, Maseno University, said that it is clear that Kenyan youths have a poor saving culture which he attributes to financial indiscipline.

“Yes, the majority are unemployed or some are earning something. I’m not talking about the working class because their case is different,” said Prof Mwangi.

He said that he started a part-time hustle of selling boiled eggs during his time at the University of Nairobi.

In what started as a small business, the ‘boiro’ as many refer to it, amassed clientele. This enabled him to pay rent and fees since he came from a humble background.

He later took a bank loan and built rental houses which further increased his income.

“I decided to try my luck in real estate. I went to the bank and borrowed money to build rental houses. The bank did not decline my request. I received and immediately started the project,’’ he explains.

He faults a majority of university students for squandering their little in Jamborees. A lifestyle that he attributes to “personality and economic vandalism”.

“Helb is giving students loans and any additions from parents or guardians. It is unfortunate that the majority are using the amount partying. You are not on payslips, why waste resources?’’ he said

His statements mirror the RBA report which states that youths are reluctant to save in pension schemes because they believe that upon retiring they will have other well-paying jobs.

It applies in some cases where someone becomes a consultant but for those who do not venture or their plans fail to go through, they become a direct recipe for old age poverty.

Sylvia Mwendee, 25, a businesswoman in Soweto, in Embakasi East, Nairobi County argues that youths have the energy to take more risks unlike the old who just want to rest after years of ups and downs.

“I strongly advocate for the 50, 30, and 20 budget rule. This means 50 per cent of your income goes to necessities, 30 toward entertainment and “fun,” and 20 per cent toward savings and debt reduction. Since money can depreciate over time, investing and saving can save a lot,’’ Mwendee.

Saving vs investing

Daniel Mugo, 22, who recently finished his undergraduate degree studies says that when it comes to money, no age bracket is as desperate to get it as those in their 20s. The conundrum comes when they have to juggle between saving and investing.

He blames the education system which is theoretical in nature hence failing to offer real-life solutions to problems on finances.

Daniel says that lack of financial knowledge leaves most youths adrift and they take to drug abuse, which ultimately leads them to early graves.

The average percentage of youths who are aware that there is a Nairobi Stock Exchange market is lower than 5 percent, according to KNBS. It recommends that people must be taught about financial literacy from the word go.

Awour Jaber, 27-year-old freelance journalist based in Kisumu, said that saving early to beat old age poverty is one of the overused phrases that lack meaning for many Kenyans.

“In Kenya, unless one comes from a well-connected family saving early may actually mean waiting until such a time that you will get into meaningful employment,” said Awour.

“One thing most people must understand is that even with what we call mainstream employment, side hustles are key in boosting saving power.”