So you made your first dollar from a job, gig or business
deal? What next for you? More often than not, it is not what we make that
matters but what we keep out of what we make. Earning six figures is no
guarantee of financial security. While there is a lot of good that comes with
earning highly, if you don’t put systems in place, you are likely to fall into
the famous rat race of trying to catch up with the bills. Clason in his
timeless book, ‘The richest man in Babylon’ advocates strongly for the need to tame
your needs and appetites. The way we are wired pushes us to adjust our
lifestyle relative to our income and because of that it takes deliberate effort
to stay on course if you are pursuing financial freedom. This is where savings
vehicles come in handy. The need to tame the leakage of your hard earned money
requires that you take steps to store some of it in places where it can grow to
a level that will help you achieve your big goals. Here are six jars you can
use to hold your monies for future use.
The Bank
Every bank I know has savings accounts that you can use to
hold your money for as long as you need. I know the interest rates are abysmal
to say the least but when that money is locked up in there, your chances of
misusing it reduce significantly. It definitely is an upgrade from ‘mattress
banking.’ I also know that many of us have savings accounts that have no
savings to write home about. What you need to do is identify a bank that has
accounts capable of locking in your savings by restricting withdrawals and
giving you incentives to save with regularity. The KCB Goal account is a worthy
mention in this regard. What other banks do you know of that offer this kind of
savings accounts? When are you opening that savings account or funding the one
you already have?
MMFs
Money market funds are a good place to hold your monies if
your need to hold them for a relatively short duration-anything below three
years. What they do is put together units comprised of shares and government
papers. In buying a unit you are spreading the risk across several asset classes
in a way that almost guarantees the safety of your money. The institutions
which offer them will gauge your risk profile and advise you accordingly on
what to buy. On average their interest rates are slightly better than savings
accounts. It is also easy to liquidate them if the need arises. The CIC Money
market Fund is one of the best performing ones in this category.
SACCOS
Just like the name suggests, these are outfits that help
people save and borrow for both emergency and development purposes. When you
get into a SACCO you buy share capital and also save through your membership.
There are people who prefer to have their salaries processed through their
SACCO rather than the bank. This makes it easy for you to transfer the portion
you have set aside for savings seamlessly into your account. The shares earn
you a dividend at the end of every financial year. This is a place you go into
if you have chosen to stay long term because the share capital is
non-refundable. You can only transfer it to another member if you want to exit
the SACCO. Before you get into one, be sure that you want to stay long term. It
is also better to be in a SACCO where you know people especially if you are
thinking of borrowing for development. This is because of the need for guarantors.
I belong to Stima SACCO and have enjoyed the experience so far. What is your
experience if any with SACCOS? Is this a vehicle you would consider
exploring?
Insurance
Many people have had nasty experiences with Insurance
companies especially in the General and medical business areas that they hardly
have any time for an agent who comes seeking to enlighten them on Insurance and
how they can save through policies. When your understanding of Insurance is
limited to risk, you will have a difficult time understanding how a product
will help you save for the future. Insurance companies have products tailored
to help you in your long term savings journey including education plans and
endowments. These pay a bonus every year in most cases accumulated and paid to
the policyholder upon the maturity of the plan. There are added advantages
including tax relief, life insurance, disability and loss of income covers. In
my opinion this is one of the most underrated and misunderstood savings
vehicles out there. As an insider in this industry, I can help clear the air on
some of the questions you might have regarding how to use insurance as a viable
vehicle for the planning of your future. Feel free to DM or ask questions in
the comments for your benefit.
T bills and bonds
The government borrows from the public through treasury
bills and bonds. The beauty of these papers is that they are as secure as any
vehicle can be. It is very rare for the government to be incapable of honoring
its obligations in paying lenders. The interest rate is also attractive. This
papers fall in the category of both savings and investments because of the rate
of return offered. Bills are short term while bonds are long term. Before you
put in the money, be sure about when you need it out so that you don’t get
stuck yet you have money trapped in places where you can’t get it out easily.
M-banking
This would have been the first option I brought up but since
it is linked to a bank and I spoke about banks first, I kept it last. If you
feel like you don’t have the time to go into the bank and get started, then
your mobile phone is the easiest place to start. You can set up on M-shwari for
example and lock your savings up until the time when you need to use them.
Different banks also have apps and other platforms where you can initiate the
process. There’s truly no valid reason why you cannot get started on this
journey if you have the will to do it.
To do list
What other options can you add to the list? Of the six
listed here, how many have you taken advantage of? Having learnt or
familiarized with these six avenues, what is the next step you are going to
take to boost your savings stating today? Share in the comments.
Next week we tackle investment vehicles.
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