Here are Savings and Investment Options to Consider

Money looks good in the bank than on your feet. This statement can be used to insinuate a lot. Money is more secure in your bank account, or in your savings account, than when it is at hand.

For us to keep our money safe from theft and unnecessary spending, we have to consider the best saving options.

Consider the following if you have plans to start saving and investing;

Savings account.

A savings account can be defined as a cooperative institution that is created owned and managed by its members-often employees at a particular company or members of a trade work association.

The money is insured by the Federal Deposit Insurance Cooperation (FDIC) up to a certain limit.

Restrictions do apply to savings account and fees may be charged if you try to defy the terms of service.

Savings accounts also separate the actual income to the savings and gain some interest.

Here is an example of a mobile savings account in Kenya:

M-Shwari

This is a paperless mobile banking service that is offered through M-Pesa a mobile money transfer service by Safaricom Kenya.

M-Shwari has certain features;

• Enables you to open and operate an M-Shwari bank account through your mobile phone, through M-PESA, without having to visit any bank to fill out bank account opening forms.
• It provides you the ability to move money in and out of your M-Shwari savings account to your M-PESA account at no charge.
• It gives you an opportunity to save as little as Ksh.1 and earn interest on your saving balance. This cash is moved into the savings account using your handset via the M-PESA Menu.
• Enables you access micro-credit product (loan) of a minimum of Ksh.100 anytime and receive your loan instantly on your M-PESA account.
• The daily average deposit balance will earn the customer interest even with the minimum balance amount.
• M-Shwari has competitive interest rates on savings, better than the other banks.
• The minimum amount you can deposit in your account is zero.

M-Shwari also has a locked savings account option.  The funds saved on the M–Shwari Lock Savings account will be kept in the account until the maturity date; this maturity date is determined by the customer upon opening the account and ranges between one and six months. Customers can make a micro deposit into this.

Bank deposits (fixed and savings accounts)

These savings accounts are one of the most secure but with low interests. You get a return of your money depending on the interest you make on it. The current interest rates are at a minimum of 7.25 percent.

Treasury bills and Notes

This is a good form of savings. The treasury bill works in a way that you give loans to the government and they repay you back with interests.  How much you can make varies and it depends on when you invested.

You have to open a Certificates of Deposit CDs account with Central Bank of Kenya (some banks can assist you with this).

Read Also: 5 Mistakes to Avoid When You Decide to Start Saving Money

You have to decide on the period on which you are loaning the money, CBK specifies the following timelines; 91, 182, and 364 days. When the period in the terms expires, the money is deposited back into your bank account.

For more information, check on the CBK’s website.

Bonds (Treasury Bonds)

A bond is a low-risk debt investment similar to promissory note IOU which is issued by companies, municipalities, states, and governments to help fund projects.

When you purchase a bond, you are lending money to these entities.  In exchange for the “loan,” the bond issuer pays interest for the life of the bond and returns the face value of the bond at maturity. Bonds are issued for a specific period at a fixed interest rate.

Each of these bond types involves varying degrees of risk, as well as returns and maturity periods. Also, penalties may be assessed for early withdrawal, commissions may be required, and depending on the type of bond, may carry additional risk, as with corporate bonds where a company could go bankrupt.

Unlisted equities (Chamas)

Such securities are issued usually by smaller or new firms who cannot or do not wish to comply with the listing requirements of an official exchange.

These include things like family, friend or brother’s business. You can also invest in these through chamas. Entrepreneurs looking for equity for their business sometimes approach chamas.

Chamas work in a way that resources are pooled together with that of other investors where you contribute money and then that money is invested into a certain investment product by the fund manager.

Mutual Funds (Unit Trusts)

These operate like chamas. The returns are then distributed over certain periods, such as monthly or every six months.

Kenya has different funds available including:

• Money Market Fund
• Fixed Income Fund
• Balanced Fund
• Equity Fund
• Bond Fund
• Managed Fund

Meanwhile, you can consider some good savings and investment options from the financial expert Amana Capital in the 7StepsToWealth. The free online course is now on STEP 4  termed the ‘Saving Options’. Sign in today and get versed with the best financial ideas especially about saving.

Read Also: Saving Tips: Splendid Ideas on How to Free up Cash