- It is well established by research that people who feel a sense of control over life events are often happier, cope better, and are more resilient in times of stress than those who do not.
Learning how to manage money is an important life skill and getting the balance between spending and saving right is fundamental.
According to the 2020 Comprehensive Poverty Report by the Kenya National Bureau of Statistics, 15.9 million out of 44.2 million Kenyans are poor.
These are adults earning less than Sh3,252 in rural areas and Sh5,995 monthly in urban areas.
Given that most households in Kenya depend on their daily wages, striking a balance between saving and spending remains quite a challenge. In most cases, families are left with minimal or no savings.
According to a recent World Bank report, most African countries’ savings rates are relatively low, around 17 percent of gross domestic product. Kenya is no exception; in fact, the country ranks lower than many of its peers (around 13-14 percent of GDP over the last five years).
This is half of the average for low-income countries (26 percent of GDP). By contrast, neighbouring Uganda and Tanzania have already crossed the 20 percent mark even though their per capita income is significantly lower.
One way to promote a savings culture is through financial literacy. The national government through the Treasury has continued to stress the importance of financial literacy and developing a savings culture.
Specific to the banking sector, inculcating financial literacy among Kenyans remains important because individuals and households lacking adequate access to affordable and convenient formal financial services may be severely constrained in participating fully in the economy if they lack basic financial knowledge.
Financial education can help individuals to understand the basic principles of money management, including how to set budgets and manage finances. They can learn how to build a personal savings plan — all to support short, medium — and long-term saving goals; whether that is saving for a first home, holiday or to generate income at retirement.
Some people may ask: Why is it crucial for people to save? The simple answer is that saving has never been a respecter of what you earn.
It is a habit you need to adopt, whether you are rich or poor. Within the context of the financial fallouts brought by the Covid-19 pandemic, having sufficient emergency funds and savings has become more important than ever.
Similarly, it is well established by research that people who feel a sense of control over life events are often happier, cope better, and are more resilient in times of stress than those who do not.
Conversely, people are especially unhappy in situations where they perceive themselves to have a lack of control. Having some savings allows you to have some sense of control during times of uncertainty.
The Absa Junior Eagle account, for example, is a dedicated savings account for children between the ages of one month and 17 years. One of the simple ways to teach children how to save money is by giving them a piggy bank and challenging them to fill it up as soon as possible. You could consider incentivising their efforts to save and highlight it as a way to grow financially.
Mwarey is head of retail business banking products at Absa Bank Kenya