- What is saving?
Saving is the practice of putting aside part of your current earnings for future use. It is not done once but over a period of time. You may have to sacrifice current luxuries to save for a better future.
- "One by one makes a bundle"
You don’t need much money to start saving. Whether you are a student, a farmer, a teacher, nurse, banker, market vendor, taxi driver or a business person, you can always put a little money aside. When you save regularly, your money will "grow" as shown in the table below:
- Spend less to save more
You can save by spending less. Cutting down on consumption, such as alcohol and on buying new clothes for every function, enables you to save more money to provide for you and your family's future.
- Encourage your children to save
Parents should teach children to start saving for a purpose while they are still young. This helps children to understand the value of money and to develop a savings culture at an early age. You can help a child save money in a small tin or box (piggy bank).
- Save to avoid unnecessary debt
Savings are the best way to pay for day-to-day costs like school fees, clothing and medical charges. It is better to save for such expenses than to borrow. For example, if you start saving for your children’s education early enough, you may not need to take an education loan or borrow money from a friend to pay fees. While people sometimes get into "debt trouble" by borrowing unwisely, they never get into "savings trouble".
- Always have an "Emergency Fund"
Savings are very helpful in addressing unexpected or unforeseen problems such as illness, accidents, unemployment, robbery, drought, funerals, too much rain that destroys crops etc. In such situations, your savings can help you as you recover. Make sure that you keep money for emergencies. If you ever have to use part of your emergency fund, top it up again as soon as you can.
- Save for special events
Have a savings account or a small tin or box to save for luxuries such as birthdays, a wedding ceremony or holidays. You can plan ahead for this and hence save over a long period of time. For example, if you plan to have a wedding at the end of next year, you can plan to save 100, 000/= every month for 20 months. By the wedding day, you would have saved 2, 000,000/=. It is your right to enjoy your money if you plan and save towards such luxuries.
- Choose how and where you want to save
Many times we find excuses to avoid saving, claiming that we don’t have enough money or we don’t know how and where to save. Here are some options you can choose from:
- Saving in a savings account with your bank or Microfinance Deposit-taking Institution (MDI). You can save via regular deposits or a standing order from your current account to your savings account.
- Saving through a group e.g. Savings and Credit Cooperative (SACCO), Village Savings and Loans Association (VSLA) or friends that come together and save regularly.
- Saving some money, such as coins, in a small tin or box (piggy bank) at home at regular intervals and then banking it when it has filled. This works well for children because it teaches them to save and value money at an early age.
- Keep your savings safe
No matter where you save, make sure that your money is safe.
- In licensed financial institutions, such as commercial banks and Microfinance Deposittaking Institutions (MDIs), your savings are insured up to 3,000,000/=. If the institution closes, you will be paid back up to 3,000,000/=. If you had saved more than 3,000,000/=, you may get back some or all of the rest of your money when the institution has paid off its debts. Licensed institutions will not easily close down as they are closely monitored by the Bank of Uganda to make sure they are reliable.
- It's only in a few SACCOs that savings are insured. When you want to keep your savings in a SACCO, it is wise to ask other members what their experience has been before you start
- When you save with a Village Savings and Loans Association or a group of friends, make sure you can trust the other group members and ask for regular accountability to reduce the risk that someone walks away with your money. Also check that the group's money is kept in a safe place where it cannot easily be stolen.
- Don’t save large amounts of money at home. It might easily get stolen or destroyed by fire, insects or other animals.
- Make the most out of your savings: with big interest and small fees
When you save with a savings account, you should be paid interest. In order to make sure you get the most from your money, find out:
- How much interest you will get. Different institutions offer different interest rates. Some of them pay interest monthly and some yearly. Compare it all.
- What fees and charges (if any) you will need to pay. There might be an account opening fee, an account management fee, a deposit or withdrawal charge, etc.
- How much notice (if any) you need to give before taking out your savings and what penalty (if any) you will have to pay if you take out your money before then.
- Four steps to achieve your savings goals
Follow these four steps to achieve your savings goals:
- Decide what you want to save for and find out how much it will cost – whether it is buying a house, land, starting/improving a business, studying or saving for your child’s school fees, etc. Ensure that what you are saving for is realistic and not over-ambitious.
- Start saving now – the sooner you start, the sooner you’ll get there.
- Put your savings in a safe and secure place where you earn good interest.
- Keep saving regularly and over a long period of time. It’s only then that your money can accumulate.
- Savings give you financial security and controlWhen you save, you have some form of financial security and control. You will feel more responsible and independent using your own money rather than borrowed money or money given to you by others.
- Choose to save in an institution that is easy to reach and work with.
The institutions you choose should at least:
- Be safe and secure
- Be easily accessible
- Have an easy process for opening an account
- Have good interest earned on savings
- Have little or no charges on your account (make sure that your monthly interest is more than the monthly charges)
- Value and treat you well as a client.
- Make use of a standing order
Sometimes you may not be disciplined enough to save regularly. You can go to your bank and set up a standing order to ensure that you do save regularly. A standing order is an instruction to a bank to pay a set amount of money at regular intervals from one account to another. However, take note of the charges. If you are an employee, you can also ask your employer to transfer part of your salary directly to your savings account.
- Get more for your money - on a fixed deposit account
A fixed deposit account involves locking away a particular amount of money for a certain time period at a fixed rate of interest. You will be charged a penalty if you withdraw this money before the end of the fixed period. The rate of interest is normally higher than on other accounts, so this can be a good way of keeping your savings. But only put money into a fixed deposit account if you are confident that you will be able to lock it away for the whole of the fixed period.