Best way to save money: When it comes to savings, Kenyans are falling short. Nearly 70% of adults have less than ksh100,000 in their savings accounts.
Retirement funds are looking equally bleak. In fact, about half of Kenyan families have zero retirement account savings.
Particularly the younger generation likes to think, ‘I’ll save more when I’m making more.’ But whether you’re making 500,000 ksh a year or 2M ksh a year, we all have challenges saving.
Because often times what happens is when people make more, they end up spending more.
The sooner you start saving — for retirement or any other major purchases you hope will be in your future — the better. After all, time is on your side when you’re young, thanks to the power of compound interest.
In your 20s:
In your early 20s, it’s hard to think about anything else but continuing the good times from college. I know the transition from college to the working life was difficult for me. You go from waking up at 8 am, 9 am, or, yes, 10 am most days to waking up at 6 am (or earlier). Then, you fight traffic to sit in a cube punching numbers into spreadsheets for 8 hours or more.
Not exactly what you had planned for your life, right? “Mommy, I want to sit in cubicle when I grow up!” – said no 7-year-old ever. But, such is life, right? Heck, you’re lucky to have a job!
Adjusting to post-college life aside, you are probably like the rest of us. You haven’t considered retirement. I know I wasn’t serious about it in my early 20s.
With that said, you need to get serious about it. You need to make it a priority. Beginning to save before age 25 is such a huge boon to your finances later in life.
In your 20s, aim to save 25% of your overall gross pay.
Just make sure your lifestyle expenses don’t exceed 75% of your gross income.
By age 30:
Have the equivalent of your annual salary saved. If you earn 500,000 a year, aim to have 500,000 in savings when you hit 30.
Again, this includes any retirement account contributions, matching funds from your company, cash savings, or money you have invested elsewhere, in index funds or robo-advisers.
In Your 40s
In your 40s, you should be nearing your peak earning years. This is when college also creeps up on those Kenyans with kids. If the choice is between saving for your retirement and saving for college, focus on the former. There are other ways to pay for college, including having your children pay a portion. There are no second chances on saving for retirement.
In Your 50s
Your 50s are your peak earning. Ideally, you are doing other savings and investing for retirement.
If you have kids, you’re probably also facing college costs. Again, you should be focused on funding your retirement rather than paying for your kids’ college tuition. You might also be faced with having to care for aging parents in this time frame.
Take a serious look at your retirement plan in your 50s. If you find yourself behind, you might need to cut spending or plan on working a bit longer.
In Your 60s
Even into your 60s, it’s not too late to salvage your retirement if you are behind. This might entail working a bit longer or even part time into your retirement.
This is not the time cut back on your contributions to your retirement plans, either. It is also important to carefully time when you claim Social Security.
By age 65:
Have eight times your annual salary saved.