Putting aside money for future use can help you meet life goals and live a financially stress-free life.
According to the 50-30-20 budget rule, 50 percent of your money should go toward needs, 30 percent toward wants, and 20 percent toward savings.
Benjamin Cheruiyot, a financial advisor at Abojani Investments, has shared insights on how a person earning Sh70,000 can save Sh400,000 in 2 years.
According to him, a person earning Sh70,000 should save Sh14,000 monthly using the 50-30-20 budget rule.
Of the Sh14,000, Sh9,000 should be directed to a SACCO BOSA account, which offers long-term savings with borrowing privileges, while Sh5,000 should be allocated to a money market fund (MMF) account, providing stable returns.
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Cheruiyot notes that at the end of the first year, the projected savings would be Sh188,160. This includes Sh120,960 (net average 12 percent) in the MMF savings and Sh67,200 (net average 12 percent) in the SACCO BOSA account.
He advises that at the end of the first year, the account holder should move Sh100,000 from the MMF savings and buy treasury bonds.
By the end of the second year of continued savings, the money in the MMF account will be Sh144,435, Sh142,464 in the SACCO BOSA savings, and a Treasury Bond of Sh100,000.
At the same time, Cheruiyot notes that the account holder will have earned an interest of Sh 16000 by the end of the second year, which should be transferred to the MMF account, bringing the MMF savings balance to Sh160, 435.
This means that the total value of the investment portfolio will be Sh402,899 by the end of the second year, and will keep rising in the third and fourth years.
