My name is Asunta. I am 24. I am a househelp in Nairobi. I earn Sh15,000. I live at my employer's and my expenses are low. I send home Sh10,000 to help my mom who is taking care of my four-year-old child. I have a merry-go-round of Sh2,000 with other househelps in our estate. I use Sh1,000 to buy personal items, Sh1,500 is tithe, and Sh500 is for my airtime. I feel like I live hand to mouth. I would not survive in Nairobi if I got fired today. How do I start making something out of my earnings? I would like to secure my child's future and perhaps take a course because I dropped out in form three. How do I do this?
Benjamin Cheruiyot – the Engagement Lead at Abojani Investments, a personal finance and investments advisory firm
Your fears of an uncertain future are not unfounded. With escalating costs of living and disposable incomes getting thinned day by day, even the guarantee of employment is in doubt. You need to prepare for a smooth transition towards a stable and growing source of income.
The key to financial success lies in increasing income. Disciplined spending, especially on lower income, can help you attain short-term goals like savings for business and acquisition of skills.
You have allocated 13 percent of your income towards savings in a merry-go-round. However, this is not effective as an investment vehicle. Your money should generate a return, albeit minimal, to keep up with inflation. Supposing you have saved for a year, your savings amounting to Sh24,000 experience diminishing purchasing power due to a weakening shilling. You need to explore formal savings and investment options that at least work your money harder.
There are SACCOs that accept membership from the informal sector. Your savings of Sh2,000 a month will not only be safe but also earn interest and avail you a loan up to three times your savings. For instance, savings of Sh24,000 in a BOSA account can allow you up to Sh72,000 loan. This can start a side business. SACCOs have fixed deposit accounts that earn 10 percent interest per annum from as little as Sh30,000. Another option is a money market fund. This is a collective investment scheme that pools funds from institutional and individual investors who all get an equal rate of return. Interests earned depend on the sums invested. MMFs typically invest in short-term instruments like fixed deposit accounts, treasury bills, commercial papers and short-term maturity bonds. The advantage of MMFs is the liquidity of the funds, thus easy access at any time. Withdrawal orders are executed between 2-3 days.
Returns on MMFs average 10 percent per annum. For instance, savings of Sh2,000 a month will accumulate to Sh26,000, net of tax and management fees. MMFs are offered by major banks and insurance companies.
Looking at your budget, you could reduce the amount sent to your mother to Sh8,000 and increase savings to Sh4,000 then direct to either of the options above. You could use part of your savings towards your personal development. Your wish to acquire craft skills is commendable. There are courses at youth polytechnics like tailoring, baking and pastry, hairdressing, etc. However, being engaged at your employer on a full-time basis will deny you time to attend to a course. You could talk to your employer to allow you to join part-time programmes. Another option is apprenticeship. Getting attached to a practising artisan to learn a trade at a little pay is also an effective way. You could save up towards taking either of these options later when you’ve accumulated enough to leave your current employment or negotiate with your employer for Saturday classes or part-time weekday classes.
Saving Sh4,000 in a SACCO could add up to Sh100,000 in two years. You may then opt to learn a trade then purchase the basic business tools. Picking a trade will require doing market survey on what skills are in demand, plus being informed about the ease of starting your own business. Your child’s education ranks top among your concerns. Your future plans are intertwined with your child’s education as you might need to lock their education in a flexible education policy as your finances improve.
If you have any money problems, send us an email at [email protected] and leave your number for contact. Money questions will be answered on this column.
