When she was born 12 years ago, Amanda’s parents took out standing orders with their banks to each save sh50,000 a month for a total of sh100,000.
When her brother Daniel came along they set up the same arrangement for him, but this time they raised the standing order to sh100,000 for each child.
Last week the parents decided to get a better return for their children’s savings, than the pitiable rate they were getting with their children’s saving account.
They bought a 14-year treasury bond that promises them double digit interest annually or about sh11m per year. That is almost enough to cover their annual school fees at current rates.
By the way the savings to the kids’ names – now locked in the bond, amounted to sh77m!
The parents continue to save, now sh250,000 per kid a month and plan to buy another bond within the next five years.
When I heard the story I couldn’t help bt remember the saying, do not despise, small beginnings.
Or that,
"we underestimate what we can achieve in ten years and overestimate what we can achieve in a year....
There are parents who can afford to put away much more than Amanda and Daniel’s parents, but they don’t and their children’s futures, or at least their education, is constantly under threat.
Many of us don’t invest because it sounds like a difficult thing and that it requires a lot of money up front.
The minimum required to invest in the afore mentioned bonds auctioned by the bank of Uganda every month, is sh100,000.
"There are two tricks to saving....
The first is that with your income save first and spend the rest and secondly, automate the process.
I don’t know whether to laugh or cry whenever someone starts, I don’t have enough money to save.
But with hindsight I know that they just need an attitude adjustment. Most of us think we shall pay our bills and meet other needs and save what is leftover, which is usually nothing.
When the attitude adjustment is made even if you earn sh20,000 a day or a month, if you put aside one thousand shillings and adjust your lifestyle to sh19,000 you will be shocked how the shillings pile up.
When that happens it is not uncommon for savers to increase their rate of saving. Before not long they start socking away sh5,000 of their sh20,000 income.
And then a funny thing happens, when you accumulate money, your income increases.
"There are spiritual explanations for this but let us keep it at, money goes where it is looked after well....
And when you automate the process things even get more interesting.
The story is told in Kenya of the man who used to go with his boss, a white farmer in the highlands, every month to Nairobi to sell their produce and stock up on supplies.
His boss’ last stop would be to pass by his broker to deposit on his share account there.
One day his boss took him into the brocker’s office one day and helped him open an account.
He started buying shares every fortnight like his boss. He didn’t understand what it was about but was doing it to humour “bwana mkubwa”.
Independence came. The bwana mkubwa went back to England. And our driver, lets call him Kamau fell out of the habit of buying shares.
Years later, in the 80s, down on his luck and wondering how to survive, Kamau remembered he had a box of share certificates molding away under his bed.
Maybe he could get a refund on the money he had bought them for.
There was an uproar at the broker's when he turned up to redeem his money. Long story short he was good for a few million shillings.
"The moral of the story is automate the saving process. This works even if you don’t really have a future goal in mind. Start any way and you can pump up your savings when you get a cause.And as you save you can educate yourself on the investment options available in the market....
You can’t go wrong if you invest like a bank. Banks, which have to remain liquid to ensure they can meet their depositors’ obligations, have perfected the art of investment.
They start by holding cash. When they have more cash lying around than they need to cover withdrawals and loans they invest in near cash assets – assets that can be liquidated within a year. These can be accounts with other banks, treasury bills and bonds. Any additional surpluses will then allow them to invest in real estate.
The problem with the rest of us we rush the process, we want to buy property – to show we are working, treasury bills and bonds are not as sexy as saying “I own that building”.
The problem of rushing into real estate, when there is a need for cash and you cant liquidate your real estate holdings fast enough, you end up selling at a loss.
"The most successful investors are so because they create a plan, which works and stick to it regardless of what hot investment is the flavour of the month....
When you set the ”machine” in motion there is often little to do but feed it according to a pre-determined plan.
The longer you can do that – it helps if you started 20 years ago, the better. But if you didn’t start 20 years ago or 12 years ago, like Amanda and Daniel’s parents, start now and we will be talking about you 12 years from now.
