Making Savings Work For You

 

                                            

 

You have probably heard many well-meaning ‘financial advisors’ ranging from friends, parents, your spouse and even the occasional expert talking about savings.  There are as far as techniques calculated to mathematical precision on what percentage of your income should go to your savings, utilities and rent. A good example is the 50 -30- 20 budgeting plan, where 50 percent of your salary should cover rent, groceries and other expenses you will incur monthly and that ideally means the said rent shouldn’t be half your salary, 30 percent your day to day expenses like fare, occasional entertainment and miscellaneous like samosas from your favorite local. The twenty percent will be the amount you save.

This all sounds easy, all you need is to get your monthly income, budget it as such, save enough with a good Sacco that will give you a proper interest for your money and finally start your own business or make those one off purchases you have always wanted to. However, your expenses may be more than you can afford, or your income isn’t adequate enough to even cover monthly utilities, much less leave you with enough to save. In that case then, you need either an extra source of income or a better savings strategy. Whether you are a new employee, young business owner or trying to save for retirement or business, these tips will help you make more informed choices, save and invest wisely and secure your financial well-being.

1.      Pay as you earn.

This does not mean paying taxes to the government but rather paying yourself first through your savings. As soon as that cheque hits your account, chances are you have been waiting for it for the last 2 weeks of the month and all you want to do is pay off debts or make purchases and so on. However, while all these are important things to take care of, doing so will likely leave you with little or nothing to put away in your savings account.

Channeling your salary through a savings Sacco is ideal as the amount will be automatically deducted from your salary leaving you to budget your utilities from what is left over. In the long term, you money will earn interest and you can in fact borrow a loan to avoid waiting too long for your savings to add up to the needed amount.

2.       Account for your spending

The best way to do this is to create a budget that lets you track all your expenses within a period of time; a week or month, even yearly if you have attained that much expertise in book keeping. This will help you see how much is being put to both necessary and extra spending and consequently help you decide what items can be cancelled off your list to help you spend less and save more.

It is prudent to consider that while you may cut off spending in certain areas, failing to save that money will see you use it for other things which then undervalue the entire point of cutting back on said unnecessary expenses.

 

3.      Separate emergency savings from long term savings.

Emergency funds will cover unforeseen events like losing a beloved one, accidents, loss of a job and even an unexpected kid.  Failing to have an emergency account will cause you to dip into your saved money that was purposed for something else. A good rule of thumb is to save enough to cover at least 4 months’ worth of unplanned events. This then means having an emergency fund set aside before getting into savings for investments or retirement.

4.      Find other means to earn money

Apart from the amount you regularly earn from your job, if you find yourself consistently straining to get by or save, it might be time to consider that you are probably living beyond your means or get a second source of income.

You can leverage skills you have and make a living out of it, take temporary tasks or start a side hustle. Basically, get creative with your money and in good time you will have enough to invest with.

Saving with Imarisha

There is now a continuous shift in how we view finances and why financial literacy is more important than ever. Imarisha Sacco aims to partner with you in your financial endeavors. There is a range of products you can patronize that will help you save and borrow with the Sacco.

·        Savings Account

This is a FOSA product where a member can;

1.      Save and make deposits or withdrawals at any time.

2.      Channel other payments as from farm proceeds that will allow them to qualify for loans and advances.

3.      Use the account to channel their salaries and stay eligible for Salary advances, Inua Loan and Daraja Loan.

To open such an account, all you need is you National Identity Card and a passport size photo which will be taken for free on the day of opening your account.

·        Fixed deposit account

This account will let you make a deposit for a specific period of time to earn interest. This is the best option if you find yourself occasionally going to your savings and making withdrawals unnecessarily.

The minimum amount to be deposited is Ksh 20,000 for a minimum period of 1 month.

The interest you earn is negotiable and be based on certain criteria.

 

·        Parrot Account

Savings should not only be limited to your personal financial plans, your children will do well to cultivate financial discipline at a young age. You will as the guardian or parent, come in to help them in their savings journey or be their financial advisor as the account operations will be on you.

This account is open to children of 1-18 years and requires a minimum of Ksh 1000 opening balance. To further encourage saving, interests are earned on amounts worth over Ksh 5,000 and withdrawals can be made to a maximum of 3 times yearly.

·        FOSA senior citizen account.

It is never too early to plan for your retirement. The FSCA is meant to cushion a member against the period he or she has stopped earning. All you need is to have a pre-existing FOSA account, make a monthly minimum contribution of 500 which cannot be withdrawn until retirement. This amount will earn an attractive interest rate yearly.

·        Share Drive Account

The Share Drive Account lets a member build a deposit they cannot withdraw. This deposit will earn a predetermined interest rate of 20 percent.

In a period of 5 years, the deposit will be transferred to the member’s share capital. This is the best way to invest passively and let time give back to the amount you have invested.

When all is said and done, it is important to find a savings style that works for you so as to ensure you do not backtrack in your financial journey.

Happy Saving!