Financial Advice and Information for Kenyans

Like always we started the year with resolutions and goals and high on the list of priorities is getting our personal finances in order. Planning for your financial future may not be the most exciting topic for discussion but it’s one of those areas of life where a little forward planning can reap huge benefits.

Solid financial planning can be the difference in making your financial goals a success and stopping constant worrying about making it to your next payday. Read more

Quote of the Week: “A good battle plan that you act on today can be better than a perfect one tomorrow.” General George S Patton.

For many people, personal worldviews change the instant they become parents. When your firstborn child enters the world, your priorities change from thinking of your own goals and interests first to the responsibilities of caring for the child; and this includes financial responsibilities as well.

1. Saving money for their university education. 
All parents want the best for their children, a bright future full of achievement. With steadily rising expenses in our daily lives, raising children is becoming more and more expensive. The growing concern for many parents is their financial readiness to send their children to a tertiary institution. While this may not have crossed the minds of many new parents, or even those with teenage children, it is an area that needs to be addressed; and the earlier the savings are set up, the better. The best way to do it would be to set up an automatic savings program, like a standing order, to an account dedicated towards saving for your children’s tertiary education. Money market funds are a good place to start because they give competitive returns, while at the same time ensuring minimal risk in your investment. That way, you get to build the savings you would need to fund this endeavour in the not-so-distant future, in a disciplined fashion.  Read more

Quote of the Week:   “Good fortune is what happens when opportunity meets with planning.” Thomas Alva Edison-American Industrialist (1847-1931)

The Oxford English Dictionary defines an emergency as an unforeseen combination of circumstances or the resulting state that calls for immediate action. With regards to our personal finances, such emergencies could take the form of losing a job, unexpected medical bills due to sudden illness, car repairs, among others.

How we respond to a financial emergency and how we come out of it is entirely dependent on how well prepared we are to tackle it. That is what an emergency fund is meant for: In essence, funds set aside to be used in an emergency, thereby serving the purpose of improving financial security by creating a safety net that can be used to meet emergency expenses as well as reduce the need to use high interest debt, such as credit cards, as a last resort. Read more

Quote of the Week:   “Once children learn how to learn, nothing is going to narrow their mind. The essence of teaching is to make learning contagious, to have one idea spark another.” Marva Collins

Children are often left out where money matters are concerned simply because it is assumed that this is not a matter of importance to them. However, it is never too early to start teaching your children about money. Children can be introduced to the value of money using piggy banks while older children can learn to manage finances through  games like monopoly.
The first and most important step would be to start talking about money matters at home with your children. This will create the attitudes and lay the foundation for their future actions. In a previous article (Five financial lessons for your kids-issue 41/10), we talked about financial lessons for your children. This article will specifically focus on some golden rules about money to pass along to your children.

1. A penny saved is a penny earned.
Inculcating a savings culture in children is very important, and should be done as early as possible. However, teaching children to save money is not easy. They usually want to spend money they receive immediately. Often to encourage savings, you may need to show children the benefits of saving in very straightforward ways. For instance, for every shilling that a child saves, you could offer to put up a matching contribution. To make their savings visible and real, have them build up savings in a piggy bank. You could then encourage the child to open a savings account, such as the Zimele Savings Plan, and make deposits regularly. Encourage them to track the interest earned on that account as well. This way, the child is able to grasp the basic concept of saving money and earning interest on it.

2. Stick to the budget.
As a parent it is your primary responsibility to equip your children with life skills. Learning how to properly manage a budget is one of life’s most valued skills; both spending and saving habits can be taught early on. If you show them an appropriate balance between the two, you can save them many years of financial difficulty.
To effectively instil this habit, it would be important to give your children an allowance; a little money that they can spend on their own. Once you start giving your children an allowance, you can then encourage them to identify fun things to spend their money on. For older children, prioritizing the list can be a helpful challenge.
For instance, a good way of doing it would be hanging a picture of a wanted item of their wish list on the wall, to remind them of that they are working towards. That way, they can plan on the allowance they receive, so that they can afford to buy the object they desire within a given time period. Of great importance where sticking to a budget is concerned, is being able to distinguish between needs and wants. This will  help them to be more disciplined with their money. Let them know that it is okay to treat yourself with wants but only when you have the extra cash to spend.

3. Stay out of debt.
Children learn by watching how their parents behave, so parents need to be good role models. In this case, it would be advisable to avoid actions that encourage debt accumulation, such as using a credit card in front of your children. Encourage them to live within their means by only buying things they can afford, and paying for them in full, and in cash.

4. Giving back is the best gift.
Donating to charities, including volunteering in your community, is a very important value for children to learn. At a young age, children can donate clothes and toys to churches and other institutions. Ultimately, the aim is not to mould children who only care about money and material possessions, it is to raise children who grow into adults who are financially aware and who are comfortable managing the various aspects of money-whether spending, saving, investing or giving back.

Conclusion:
With the right lessons and planning, your kids, as they grow older, may be able to avoid money traps like getting deep in debt, and embrace sound strategies as they save for big purchases such as graduate school, a home, and even retirement.

You can send your comments or questions to info@zimele.net , or visit our offices at Ecobank towers, 7th floor, Muindi Mbingu street. You can also follow us on our facebook page- Zimele Asset Management ( Kenya)