Saving 101: Tips on how to save money

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The entrepreneurship sphere mostly targets one’s saving ability, one fails to maintain their business due of lack of financial literacy and lasting saving skills they say. If you are thinking of starting a business soon, start saving. Kenya Business Guide spoke to Frank Mwakitakula, founder and CEO of Young Savers Kenya, who shared tips on saving. 

How did Young Savers Kenya start?

Young Savers Kenya is Frank Mwakitakula’s brain child.  I conceived the idea while at Lenana School.  In form three, I had tried all sorts of saving methods to raise some cash from pocket money from my parents and relatives to enable him start a business back at home that would generate income to assist him pay fees but failed. I had conversations with teachers and friends and realized that so many students were facing the same challenge. I also realized that there was a gap in financial literacy and saving habits among fellow students. Some wanted to save but didn’t due to lack of such a platform in school and some saved using traditional methods such as ‘locked tins’. I couldn’t imagine the same happening to millions of students in the country, within East Africa region and the whole of Africa. There was an unmet need, a solution was necessary and could be found; and then the idea came up.  I realized that saving for future investment or any other goal needed a platform, skill, patience and discipline.  The solution would be Young Savers Kenya!

Initially the idea was charity-like, just to enable students save but during the process of developing it, I realized that the idea could actually be commercialized.

What mistakes do entrepreneurs as regards to saving?

Spending first and then saving what remains, instead of the other way round. Money should be considered as part of the expenditure and not some reserve that can be accessed at anytime.  Entrepreneurs must build the discipline required to put a portion of their money aside first before they spend it.

Secondly, poor monitoring of expenses and living outside one’s means. This takes away the money that should have been set aside for the company’s future financial needs.

What are the benefits of financial literacy?

Financial literacy helps a person:

  • Distinguish between personal and business finances.
  • Be a competent buyer of financial services-understanding financial products, their costs and risks, and selecting what is suitable for the business.
  • Anticipate the businesses’ future financial needs under alternative scenarios.
  • Assess the risk to which the business is exposed and prepare appropriate responses.
  • Understand the decision-making process of financial providers and thus appreciate how the business can become credit-worthy or investment ready.
  • Relate the business’ financial needs to the country’s regulatory and fiscal framework – to appreciate the nations regulatory and tax efficiency.
  • Exercise financial management, for instance; to use financial information to analyze business performance and create policies and controls that optimize this.
  • Generate spendable cash and opportunity war chest for the business that would help it take advantage of opportunities.
  • Bring in the dead capital (financially invisible assets like; mental capital, lands without title deeds, undervalued buildings, ideas) within their ventures into the mainstream financial system.
  • Avoid majorities of financially illiterate directors on company boards.

As an entrepreneur, how does one save?

  • Don’t save what remains after spending, spend what remains after saving.
  • Monitor expenses – know what you have spent and how much one has available to spend.
  • Budget – this is the ability to plan one’s spending frequently and accurately as well as to adhere to ones spending plan. This coupled with monitoring expenses will avail more funds to save for future financial needs and prevent the company from running out of cash.

So how does one stay disciplined? 

  • Have objectives and goals – this will enable you have some inside drive to achieve the objective or goal set.  The desire to meet the objective will always keep you on toes to deposit savings so as to achieve it.
  • Reduce unnecessary expenses – some expenses can be foregone and the money instead replaced with savings or rather adds up on savings without struggle.
  • Know how much you have – knowing how much you have or earn will make you plan on the most appropriate amount to allocate for savings without straining or overstretching personal resources.
  • Practice – saving is a skill and can be learnt with proper practice till it becomes a habit.
  • Mindset – It’s all in the mindset.  If you convince your mind that saving is so important and should be part and parcel of your budget, then it will be done with so much ease.

What is the main aim of saving?

  • The main reason for saving is to cater for future financial needs; expansion of ventures, emergency situations, tertiary education, retirements. All this is geared towards achieving financial freedom.
  • Emergency cushion – this could be any number of things; out of pocket expenses or sudden loss of income. You will need money set aside for these emergencies to avoid going into debt to pay for your necessities.
  • Retirement – if you intend to retire someday, you will probably need savings and/or investments to take the place of income you’ll no longer get from your job.
  • Average life expectancy – with more advances in medicine and public health, people are now living longer and needing more money to get by.
  • Volatility and of social security – social security was never intended to be the primary source of income and should be treated as a supplement to income.
  • Education – the costs for private and public education are rising every year and it’s getting tougher to meet these demands. Without money put away in savings and/or investments, you open yourself up to other risks as well.  For example, not having enough money to pay for emergency dental care may force you into taking a loan that your savings might have otherwise covered.

What is the appropriate age for one to start saving?

A newly wedded couple should start saving for their unborn kids. To the kids, the parents should take the responsibility to teach their kids about saving money as soon as they start handling cash such as being sent to shop to purchase something.  This will go a long way with them and will develop that financial discipline as they grow and continue to handle “bigger cash”.  All this will help build an upright well molded child as money as they say is the mother of all social evils.

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