What are some of the financial/saving plans that are there? Do you think this information is accessible to young people out there? Do you think young people have information on where they can invest their money and gain returns? These questions created a baseline for our conversation and answered questions on how young people can tap into some of the plans and be able to have financial freedom and gains. If you take a walk around asking young people what kind of bank accounts they have or own, the majority of them have no idea on the type of account they have.
We asked the same question to our participants during the coffee bar and to confirm this, 19 people do have bank accounts and only 4 have an idea of what type of account they have. The four have a salary account, fixed account credit account and savings account. For your information, the majority of banks have different accounts such as salary accounts, savings accounts, fixed accounts, recurring deposit accounts, money market accounts, and brokerage accounts among others. Keep in mind these types of accounts vary from one bank to another.
There are several reasons why most young people do not invest their money with lack of jobs and lack of information on financial literacy being among the top reasons. Many young people don’t have any money left over to invest because of their lifestyle. However, even the employed don’t have or understand how and where to invest their small money thus why this financial literacy was the topic of the day.
Here are some of the financial and savings plans where young people can tap in to.
A savings account is an account where your money earns you interest. The safety and reliability of these accounts make them great options for parking cash you wish to keep available for short-term needs. You can make your hard-earned money work for you with a savings account with one of the best bank interest rates in Kenya. Interest is based on the day-end balances in the savings account and interest rate varies from 1% to 7%. The interest rate will be determined by your bank, money saved and period.
Fixed Deposit Account
A fixed deposit account is an investment account where a customer deposits a specified amount of money for a certain/fixed period of time. Through this, the fixed amount accumulates interests for the period the money is held in the account. Fixed deposits are almost the same as savings accounts. The only difference is you cannot access your money for an agreed fixed period like one, three, six months or a year. Different banks allow KShs 20,000 as a minimum fixing amount. Your savings can earn you between 4% – 7% for the period locked. The interest rate will be determined by your savings, your bank and period fixed.
Money Market Funding
A money market fund is a type of interest-earning savings account. Before investing elsewhere or making an anticipated investment, money market funds are a good place to park money. They are not suitable as long-term investments. Among investment options, money market funds are considered to be extremely low-risk. They also offer relatively high returns to investors compared t traditional savings accounts. Most Money Market Fundings offer returns on investments ranging from 7.0% to 10.6% annually. The interests also vary from one financial institution to another.
Treasury bills are short-term investment or units; in simple words these are debts also known as government debt, meaning that you are investing in the Kenyan Government. They offer you returns after a relatively short commitment of funds. This means that investors choose the amount that they will receive when the bill matures, or the face value of the bill, and pay less than that amount when purchasing it. Treasury bills mature in 91, 182 or 364 days, so you will receive your returns within three, six or 12 months. The first step to investing in Treasury bills is to open a CDS account with the Central Bank. To open a CDS account, you need to hold a bank account with a Kenyan commercial bank. Read more Here
Treasury bonds are a secure, medium- to long-term investment and are units of government debt, meaning that you are investing in the Kenyan Government. They offer you interest payments every six months throughout the bond’s maturity. The Central Bank auctions Treasury bonds on a monthly basis, but offers a variety of bonds throughout the year, so prospective investors should regularly check for upcoming auctions. Treasury bonds are auctioned every month, providing ample investment opportunities for diverse financial needs. Treasury bonds are offered for a set amount of years, ranging, to date, from one to 30 years. The difference between bills and bonds and timeframe. Read more here
A Sacco is usually a group of similar minded people, registered by the Ministry of Cooperatives, and authorized to receive deposits and provide loans to members. This is also a savings plan that is more conducive to young people since it doesn’t require much money as savings. Members are required to save consistently and this, in turn cultivates the discipline of saving frequently. Some Saccos also have a minimum monthly savings amount that is aimed at helping members keep up with their savings goals. The beauty of sacco is you are able to get dividends at the end of the sacco’s financial year. Some saccos offer dividends of between 6% – 18% per share; keeping in mind this varies from one sacco to another. The other benefit is you are able to access a loan 3 times your savings, meaning if you have saved Kshs 30,000, you are able to access 90,000. However, the saccos also have their other bad side such that you need a guarantor for you to get a loan.
Owning a share is the same as owning a piece of the company. When you buy a share in a company, you’re effectively becoming a part owner of that company. Its true that young people are not investing because they do not understand the process involved with buying/selling shares and how the market works. The Nairobi Securities Exchange is the official stock exchange in Kenya. It is the central marketplace where buyers and sellers of Kenyan shares meet to trade. Ndindi Nyoro started buying Kenya Power and Lighting Company shares in his first year at Kenyatta University. Currently, he is the top individual shareholder meaning it’s possible for young people to join this investment venture. People buy shares to make a profit from buying and selling securities and to earn dividends and capital gains from being a shareholder. You must also know that when buying a share of a company, you must be ready to share both losses and profits together.
This is a savings account but being hosted by Safaricom. It allows M-Shwari customers to save for a defined purpose and for a period of time. There’s a difference between Mshwari and Mshwari Lock Savings and in this case our focus is on the lock savings. The funds saved on the M-Shwari Lock Savings will be kept in the account until the maturity date. The M-Shwari Lock Savings Account is ideal for customers looking for higher interest rates and those wishing to keep money away safely for a short period. Majority of us do save money on the normal Mshwari where it doesn’t give you any interest. The Mshwari Lock savings account earns an interest between 5% – 7% per annum. The interest rate is constant during the investment period and is calculated daily and paid out at maturity. Read More Here
Disclaimer: This is not from a financial expert but from research and reference from people already doing it.
As a young person, you need to learn how to make money while you are sleeping and make your money work for you. The sooner you start investing, the better for you. It’s also good to note that some of these financial plans need more advice and due diligence before investing in them. Keeping in mind there is no guarantee that you’ll make money from investments you make.
It is better to start early, even if it is a small amount to start with. But getting the facts on saving and investing and following through with a well outlined plan, as a young person you should be able to gain financial security over the years and enjoy the benefits of managing your money. We also challenge financial institutions to work with young people in disseminating such information. See you on Tuesday!