Man is a social being. There is therefore a tendency for anyone to follow fads and waves rather than apply thought to decision. A common area we like following waves of popular opinion is in management of finances.
In Kenya right now, everyone is talking of savings as a financial virtue. But then, if we look at it critically, is it really worth it? The most common mode of saving cash is through bank accounts, most probably over time. After the Banking Act of 2016 was instituted, banks were forced to cap rates for loan interest and savings to a predetermined Central Bank rate. Right now banks pay interest on funds held at 6.95% per annum. Imagine if you are to invest in a plot somewhere the same amount….the returns would be much higher – averaging 20% per annum. Most unit trusts pay on average of 11% per annum on funds held. Actually, a known private equity firm that invests in real estate puts the return on investment at 24% on average, paying its investors a return pegged at 18%.
But then, why do many go to keep money in banks in the name of saving? This is the reason why i had to fall out with a proponent of a popular 52 week savings plan where members would tie down their money for a whole year, saving in a bank. That is lack of wisdom!
Come to think of it, this lack of intelligence transcends across the board even to governments. Take for instance an African country which i choose not to name that has rich deposits of mineral copper. It sold the mining rights of the mineral to a consotium of foreign companies for $25 Million. The fees was to be paid over a period of time. The company got to the ground, mined and started exporting the ore and earned in its first three months, revenues totalling $75 Million!
The problem is therefore not in having the ability to get wealthy per se, but in the application of wisdom required to convert the resources we have into sustainable wealth. For the average Kenyan, they lack intelligence to appreciate the power of numbers. That is why, it is a better option, thanks to waves and fads, to keep money in the bank oblivious of the relatively better earnings in investments and the power of inflation over time.
Methinks we just have to seriously rethink our priorities and options when it comes to money matters. There is a need for the common citizen to be taught financial intelligence so that they can best manage their money and earn from it.
This reminds me of the popular parable of the talents in the bible….when the time comes, will you be that good and faithful servant who ensured the few he had was more over time, or will you be the foolish one who kept his under the mattress and never made it grow?
Choose to be wise. Be financially intelligent!
The writer is the Founder & CEO of PBL Africa, a personal branding and entrepreneurship influencer.