WORLD SAVINGS DAY 2022: Savings prepare you for a better future
Savings have become part and parcel of our lives. Perhaps you have a life goal like buying a house, plot, car, etc, to achieve – you will need to save to hit your target.
World Savings Day, also known as World Thrift Day, is observed on October 31 every year. The day is devoted to the promotion of savings among people, highlighting its significance towards the future.
This year’s event celebrated on Monday, 31 October was themed “Savings Prepare You For a Better Future.” This defines the need to save for certain goals including, retirement, education, property purchase, marriage, emergencies, and investment, among others. Savings have always played a pivotal role as life savers in difficult situations, like the COVID-19 pandemic, which left many people jobless and collapsing businesses.
History of world savings day
The World Savings Day started On October 30, 1924, after the conclusion of the first International Thrift Congress in Milan, and formally called International Savings by the Italian academic Filippo Ravizza.
Following the impacts of the Second World War, people became exceedingly cautious about their savings to avoid difficulties in any future conflict. As a result, World Savings Day persisted after the war and reached its height of popularity in the years between 1955 and 1970.
World Savings Day features a different theme every year that captures the essence of saving. These ideas inspire more people to develop the saving habit. Banks and other financial institutions have also developed several programs to encourage people to save more money and make sensible investments. To encourage more people to save money, the government and institutions including schools and media outlets spread awareness throughout this vacation.
The goal of World Savings Day is to inculcate a savings culture among the youth and children. Piggy banks have long been a fantastic idea because, when kids see how much they’ve saved, it gives them a sense of riches. Furthermore, let’s face it, even grownups adore the concept of piggy banks.
2022 challenges
The year 2022 was marred by challenges, coupled with the slow economic recovery from the 2020/21 COVID-19 pandemic impacts. Among the issues included the volatile exchange rate – which saw the Kenya shilling depreciates against the US dollar, rising inflation and interest rates, and ongoing supply chain disruption.
The high rate of inflation, hitting a five-year high of 9.6% in October 2022, caught many people and businesses off guard. Data from the Kenya National Bureau of Statistics (KNBS) showed that inflation was exacerbated by rising food and fuel prices.
The disruption in the supply chain was attributed to global dynamics like the Russia-Ukraine war, affecting imports to the majority of African countries and across the world. Climatic conditions like the harsh drought hitting the Sab-Saharan region, Kenya included affected food security.
All these challenges point to one of the biggest lessons learned from the three years – touching on emergencies and how useful it is to have some savings. Savings are some money set aside to enable one to withstand the forces and turbulences resulting from emergencies.
How to build up your savings
- Set a purpose
Before you can take your money to a savings account, ask yourself why are you saving. This question should guide you on savings goals, period and how much money you would commit every month. You could be saving for a holiday, buying an asset like land/plot, retirement, or education among other goals you intend to meet. - Track your spending/develop a budget to guide you
Your resolution will be achieved if you incorporate it into your budget plan. When planning for your monthly expenditure, ensure you capture your resolution to keep it on course. Say you have the resolution to create an emergency fund. Include it in your budget by setting aside some amount of money every month. The budget helps you to evaluate your daily spending and highlight areas where you need to make changes. For instance, cutting on unnecessary spending and utilising pocket change after meeting all expenses. - Set investment planning
Savings alone might not help you in achieving your financial goals. But when you incorporate an investment plan, you could be able to achieve them in good time. For instance, instead of saving to buy a house, which might take a long to hit the target, plan on getting a mortgage loan from a financial institution like SACCO. - Set up emergency funds/cash reserve
This fund is key when it comes to covering your unexpected expenses. The expense might be arising from car repair, expensive medical bills, or a sudden job loss. If you were to lose your job, you’d be thankful you socked away a good amount of money into your emergency fund to tide you over until you found a new job. - Clear up most of your short-term debts
Paying debts is significant in improving your budget and savings plan. It enables you to focus more on savings. This can be best achieved if you set a strong emergency fund. Using the 70/20/10 rule could also help. The rule directs that you take 70% of your earnings to expenditure, 20% to savings and 10% goes to short-term debts like debit cards.
Savings in SACCOs
Savings and Credit Co-operative Societies (SACCOs) have been significant in promoting the savings culture. In Kenya, SACCOs bridge a huge gap in financial inclusion, empowering members of the society and different communities.
The SACCOs create value for members’ funds, driving their financial goals to their destinations through the co-operative principle of member economic participation.
The Sacco mandates revolve around savings/deposit mobilisation and loan services issued up to five times one’s savings. They are the most important financial institution for most individuals who earn dividends on savings.
The societies issue loans starting from 12% per annum, which for many years has been significantly cheaper than interest on bank loans.
According to the Sacco Society Regulatory Authority (SASRA) Supervision Annual Report, 2021, net savings in SACCOs increased to over KSh 17.5 billion.
During the year under review, the total deposits grew by 9.80% in 2021 to reach KSh 564.89 billion from KSh 514.46 billion recorded in 2020. The 176-Deposit Taking SACCOs had the largest proportion of the total deposits’ portfolio amounting to KSh 474.25 billion and representing 83.95% of the industry’s total deposits.
The 185-Non withdrawable Deposit Taking SACCOs, therefore, shared the remaining 16.05% of the total deposits’ portfolio even though they outnumber the DT Saccos.
On the credit front, the subsectors’ gross loans increased by 9.67% in 2021 to reach KSh 608.75 billion from KSh 555.05 billion reported in 2020.
The 176-DT-SACCOs’ share of the gross loans issued by SACCOs amounted to KSh 522.25 billion representing 85.79% of the gross loans issued. The 185-NWDT-SACCOs share of the gross loans amounted to KSh 86.50 billion and represented 14.21% of the industry gross loans.
