Saving money is a very good thing. Many of us attempt to save, some successfully some not so successfully. One of the factors that affect our success in saving is our choice of Savings Vehicle (place to put our savings)

Where are your savings?

1. Under the mattress?
2. In a safe in the house?
3. In a chama?
4. In your mpesa account?
5. Have you lent your savings to family and friends?
6. In a bank account?
7. A technology driven platform?
8. In a Sacco?
9. In a business project?

Savings are money that we put aside so that we can access it when we are ready to undertake certain projects in our lives and sometimes to cater for emergencies. So money already used up in a business project is not called savings, it is called equity or investment in the business.

Many of us wish to save money but since we are not aware of good saving vehicles, the money is lost or spent in ways that are not within the goals set for the savings, so we eventually lose heart.

What is the difference between savings and investment?

Saving is setting aside money that one does not want to spend now for emergencies, a future purchase, a project or for investment. It’s money one wants to be able to access quickly, with little or no risk, and with the least amount of taxes. Savings are normally put into the safest places, or products, that allow one access to their money at any time.

Investing, on the other hand, is buying assets such as stocks, bonds, unit trust funds or real estate with the expectation that the investment will make money for you. Investments usually are selected to achieve long-term goals.

When you “invest,” you have a greater chance of losing your money than when you “save.” That means that investments have more risks than savings.

Popular traditional saving vehicles in Kenya

• Savings Bank accounts
• Merry Go round Chamas
• SACCOs
• Bank deposits (Fixed & Call deposits)
• Treasury Bills (TBills)
• Money Market Funds

The last three in the list; Bank deposits, Treasury Bills and money market unit trust funds also qualify as investment vehicles. We have included them here, however, due to their short-term nature.

Modern saving vehicles

• Technology driven saving vehicles and aggregators

Factors to consider while choosing a good savings vehicle

We are going to evaluate the following popular savings vehicles against the various areas that a saver should take into consideration when choosing an appropriate vehicle. The following are the areas which one should consider;

1. Minimum initial deposit into the savings vehicle and ability to save on a regular basis.
2. Safety and security of the savings
3. Liquidity
4. Ease of exit
5. Earnings/Interest rates
6. Saving timelines
7. Ability to borrow against savings
8. Taxes, Charges, Fees and Penalties

See our other articles for more.

Article done by Peninah Kimani

CEO Givva Wealthtech Ltd