Amidst the ongoing turbulent economic times, the imperative of a robust savings culture continues to be very apparent. Businesses and companies worldwide are reassessing their expenditures, with job cuts and furloughs looming large.
Indeed, according to the Federation of Kenyan Employers, over 70,000 Kenyans employed by the private sector lost their jobs in slightly over one year, with 40 percent of employers reporting plans to reduce the number of employees to meet the increasing costs of operation.
Compounded by reports of reduced incomes across multiple sectors, such realities underscore the need for financial safety nets at the individual level to serve as buffers against the anxiety and uncertainty that accompany sudden shocks like company closures.
In the face of economic volatility, individuals must recognise the significance of prudent financial planning and savings. A proactive approach to savings safeguards against unforeseen circumstances and instils a sense of financial security and stability.
Below are some pointers to help you get started on your savings journey.
1. Financial management
Prudent financial management is a foundation for developing a savings culture. Cost-cutting measures can safeguard against downturns in income. Borrowing tips from the business world, it is important to realise that adequate liquidity through cash reserves can provide a vital cushion against unforeseen expenses or disruptions in cash flow.
2. Develop an emergency fund
Building an emergency fund that is capable of covering essential expenses for several months can mitigate the stress and hardship associated with sudden un- or under-employment.
Such a fund can also serve as a buffer against unexpected expenses, including medical emergencies and car repairs, helping you avoid going into debt or having to resort to high-interest loans. This is in addition to giving you the peace of mind to make confident and strategic decisions about your career and future financial goals.
3. Multiple revenue channels
Diversifying income streams through investments or freelance opportunities can enhance financial resilience, offering alternative sources of income during periods of economic uncertainty.
This strategy bolsters financial resilience by providing supplementary income streams, reducing reliance on a single source. During economic uncertainty, these diversified streams offer stability and flexibility, mitigating the impact of downturns on overall finances.
As you develop your savings kitty, it is important to have it stored in a secure bank account and one that offers rewarding returns. Choosing a savings account involves carefully evaluating various factors such as interest rates, fees, minimum balance requirements, accessibility, customer service quality, and additional features that align with your financial goals and preferences.
For instance, some accounts can help you put together cash for desired projects of assets. With a savings period of between three months and 10 years and access to instant credit of up to 80 percent of the deposit amount with no appraisal for emergencies, or advances, this account ensures that your savings are indeed a cushion when needed.
Julius Ouma is the acting CEO of Faulu Bank
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