You're right, there is no guarantee of living to any specific age. Life is unpredictable and even as we all hope to live long and healthy lives, unexpected events can happen at any time.
While there's no guarantee of living beyond a certain age, advances in healthcare mean that people are living longer. That is why saving for the future is so important. Even if we cannot be certain of seeing "70" on the calendar, it helps mitigate the risk of outliving our financial resources.
Regardless of one's lifespan, saving for your future is a wise and beneficial choice as it goes a long way in helping you achieve your individual goals.
Whether it's traveling the world, starting a business, or pursuing further education, having a retirement kitty can make your dreams a reality. Financial independence gives you the freedom to explore your passions and chase your aspirations without being limited by monetary constraints.
Safety net
Savings provides a financial safety net that can help you weather unexpected storms, such as illness, job loss, and other emergencies.
Imagine living the “YOLO” [you only live once] vibe only to be declared redundant at the age of 45 without anything of worth to keep you steady as you figure out your next move. In such instances, knowing you have some resources to fall back on can significantly reduce stress and anxiety, allowing you to focus on the present and make better decisions for the future.
Saving also allows you to leave a financial legacy for your loved ones. This could include providing for your children's education, leaving an inheritance, or supporting charitable causes that are important to you.
Additionally, consider the fact that cost of living is constantly rising, and inflation can erode the value of your money over time. Putting some cash aside now helps you stay ahead of inflation and ensures that your money retains its purchasing power for the future.
You also need to be alive to the fact that financial independence is a key aspect of overall independence. It gives you the freedom to make choices without being solely dependent on others or external assistance.
A Business Daily article on April 10, 2023 painted a grim picture of over 82 percent of seniors citizens back to active work for the sole purpose of providing for their basic needs. The article went further to state that 776,159 of 869,338 people above the age of 60 were in active employment whilst approximately 7,000 senior citizens above the age of 60 had joined young graduates in actively looking for jobs.
This shows that the money you save can be used to improve your quality of life in your sunset years as it can help you afford better healthcare, enjoy hobbies and activities, or simply live more comfortably without relying solely on social or family support.
One of the best ways to save money is to start a strong retirement income plan programme which is to pay yourself first. Every time you receive a salary, consider a certain percentage of your income before spending money on anything else.
If you are in formal employment, you may choose to have your bank automatically transfer a certain amount of money from your account to your savings/investments account each month. This way, the money never hits your pocket, so you do not miss it.
The earlier you start, the better. Assuming a constant interest rate of 10 percent annually, for a new saver who is 25 years old and wants to accumulate a retirement saving pot of Sh5 million by the time they are 65. He or she will need to put aside around Sh900 every month.
On the other hand, a 35-year-old who desires accumulation of the same amount must save around Sh2,400 each month, whereas a 45-year-old will have to part with Sh6,900 per month.
From the above illustration, the power of compounding interest comes to fore. It is evident that the extended benefits of regular saving, along with wise investing choices, may build wealth over the long run and result in a substantial accumulation of wealth.
Saving isn't just about accumulating wealth but creating security, freedom, and the ability to live your life on your own terms. While we cannot control how long we live, we can control how prepared we are for whatever life throws our way. Start saving today to pave the way to financial success and peace of mind.
Sam is a senior analyst at Zamara and can be reached via [email protected]
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