Saving is perhaps the world’s hardest art to master. We have a high propensity and temptation to spend whenever we have money. The ability to save calls for financial planning and restraint on our spending behaviour. Although saving is prudent, the state of a country’s economy and political stability affects it. With low economic growth for example, a major chunk of our savings goes to basic needs. The uncertainty in the national economic status has caused a paradigm shift on the way people save.  This is because money saved for a specific purpose ends up being used to prevent such crises as food insecurity and insecurity among others.

 

Kamau Presenting his Thoughts

Borrowing too, is not a simple task. The degree of information on borrowing dissemination is quite low, especially in rural areas. The art of borrowing is less understood. It is viewed with suspicion due to past instances where banks acted as deities, were more interested in the security, were less concerned on the business entity and moved with speed to confiscate the security whenever any default was detected. Security and credit profile too are a detterent to borrowing especially among the youths.  Creativity is therefore smothered as worthy ideas lack financial backing.

 

Either way, investment is a major vehicle for economic development. As an adolescent, I learnt several lessons on saving and borrowing from my grandfather. I used to assist him   fill forms on financial issues. This is what he had to say one day when I asked the importance of a bank account.

 

“Son, soon you might also need a bank account”, he said

 

“But grandpa I’m just 17 years old. Bank accounts are for the employed grown-ups. Besides, where will I get the cash to deposit? Why should I even think about giving my money to the bank?” I asked.

 

“You have many questions, grandson. I understand your concerns. You don’t have to be old or employed in order to save; savings are a security to your future, he said.

 

He asked me to employ the 5 criteria on saving and borrowing that he had always asked my uncles to uphold.

 

“When borrowing or saving,” he began, “ensure that your money does the most work for you.  Different life stages calls for different ratios of borrowing.

 

When you are a student, financial independence is paramount. Avoid borrowing as paying back would be a challenge. Over 80% of your finances should be from your savings.

 

When out of school but unemployed, the money saved while you were a student should work for you. You can use it for investment or security for a loan. Of paramount importance, however is your financial independence which ought not be compromised.

 

When single but employed, know that you will shortly have a family. In this case, you need to plan for it in advance. You will need money for children’s’ upkeep as well as investment.  Pay up your loans consistently, invest even the more and reduce the number of loans.

 

When unemployed but married, if you followed rules No. I and 2 consistently, unemployment may mean that you draft your own pay slip.  In all your investment, your pay slip should feature. Pay yourself before everybody else, as this will motivate you to seek funds for repaying your loans. Borrowing should be planned, highly disciplined and checked.

 

When married and employed, your money will fall under two extremes: family maintenance and investment. Although your salary may act as a loan security, the future is uncertain.  Your investment and employment are independent entities and must remain secure of each other, in that if you loose one, the other remains intact,” he concluded.

 

Borrowing or saving per se, may not be the best anecdote for investment. A well thought composition of the two in the investment portfolio is important.

 

By Mugure Joseph Kamau,

Kenyatta University

 

Essay submitted during The Postbank-SIFE Kenya Essay Competition