How did you learn about saving? Many of us have read of people who have accomplished milestones both in their lives and careers. We always wonder how they did it. It's interesting to note that most of the successful people we know are disciplined in wealth accumulation. With the availability of information nowadays, most people learn about savings from their colleagues at work, company-sponsored events, engagements with financial advisors, family members, friends, and the internet, just to mention a few. Well, it is essential to emphasize having the right knowledge and information is essential in the savings journey.
It is critical to think about the future because you can never tell about how things will be over a given period of time. Additionally, planning ahead makes it easy to accomplish our goals without getting into bad debts and ruining our reputation. There could be a medical emergency, loss of items through burglary, increased commodity prices (inflation), and loss of a job. Having some funds set aside can be of immense importance in those rainy days.
Like with every goal, it is the action and effort that we put into it that eventually matters. The first step we take is crucial as it will make us develop good habits that are critical in attaining what we aspire to do or become. Savings and investments should be tied to a goal. One should always start by identifying what they are saving for. What do you plan to achieve in a month, a quarter, a year, five years, or even a decade? It could be purchasing an asset or equipment, saving for education, a car, business, home, and comfortable retirement. The particular goal that you have will be critical in helping you identify the most suitable saving instrument.
There are various avenues of savings and investments which I will highlight below:
4. Retirement/Pension Schemes: These are saving instruments that allow an individual to accumulate funds that will be used upon retirement. Many corporate institutions usually provide a contributory scheme where both the employer and employee contribute a certain amount towards the scheme. In some cases, it is possible to access a portion of the pension contribution upon premature termination of a job or in the case of redundancy. However, some schemes restrict access until an employee has reached the retirement age limit. The pension sector is evolving, and many scheme managers have introduced products tailored to the self-employed as well as providing avenues for ease of contribution through the use of mobile apps and USSD Codes. They include firms like Zamara Kenya (formerly Alexander Forbes), Stanlib, Zimele, and Octagon Africa
5. Life Insurance: Various insurance products are relevant to an individual's goals, wealth level, and risk appetite. Some of the most common life insurance products are geared towards saving for children's education, short term goals, long term investment goals, as well as last expense benefits. Life insurance is especially geared towards giving someone peace of mind of having their beneficiaries catered for in the event of incapacitation(total disability) and death. It also provides an avenue of diversifying wealth creation avenues since some policy terms can go up to 10–20 years.
6. Saccos: These are membership associations that provide avenues for members to save besides allowing them to access credit facilities. Members usually also earn dividends yearly from their contributions whenever dividends are declared. Professionals in a given sector mostly use them. For instance, Mwalimu National Saccos is generally geared for teachers, while Kenya Bankers Sacco is mainly for individuals in the financial services industry.
In conclusion, it is critical to note that while some people are disciplined in saving on their own, group behaviour such as the use of Chamas to mobilize funds for investments is a great avenue to inspire continuous savings and having accountability partners. It is also essential to automate savings so that you don't run the risk of failing to do so in particular periods. Some of the automation tools include the use of standing orders so that funds are channeled to a specific account at a given date of the month when you receive your income. One should also choose a saving platform that makes it easy to make contributions but quite challenging to access the funds so that you don't end up withdrawing from the savings kitty. For instance, saving on M-PESA wallets makes it easy for someone to use the funds to cater for short term and immediate needs instead of the purpose for which the funds were initially meant for.