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Posted on 26th March 2020 By Kevin Wakhisi.

ccording to Investopedia, savings are the amount left over after an individual’s consumer expenditure is subtracted from the amount of disposable income earned in a given period of time.

These are monies you put aside for future use rather than spending it immediately. Savings are important in helping one manage their finances.

Importance of Savings

  1. Emergency cushion – Emergencies are always cropping up in our daily lives. Savings give one peace of mind as you know that there are funds stored away, in case of any emergencies that may come up for example, medical emergencies.
  2. Retirement – It is never too soon to start thinking about retirement. One can start saving for retirement as this is a period when you might not be earning active income, but you still need money for your expenses. There are many pension schemes that one can save in, in Kenya.
  3. Education – Education is one of the best investments one can make. You can start saving for any higher learning opportunities that one may find. One can also start saving for the education of their children.
  4. Future investments – One may decide to save for a future investment for example, a car or a house or even a holiday trip.
  5. Expanded options – Having savings enables one to be able to have a better control over their destiny. For example, one may want to change occupations, savings can give someone the confidence to do this, as one is not as worried about money.
  6. Avoid unnecessary spending – In order to have savings, one will likely have to come up with a budget. This helps in preventing unnecessary spending as what would have been wasted, is then saved.

Why Don’t People Save?

There are all manner of reasons why people don’t save:

  1. Poor planning – Many people do not plan their finances well. This leads to them spending all that they earn and they therefore do not have any money left over, for saving. This is why having a personal budget is so crucial.
  2. Ignorance – Many people are willing and able to save, they just do not know where to save. They are not aware of all the saving opportunities at their disposal.
  3. Lack of education – Many people are not informed, with regards to savings. They do not know how beneficial it is, and what it entails.
  4. Wrong mentality – Many people are of the opinion that you require a certain amount of income to start saving. This holds them back from saving.

How To Save in Kenya

There are a variety of ways to save in Kenya.


These are probably the most common savings tools used in Kenya. Chamas are informal cooperative societies that are used by people, to invest their savings in. The word chama is a Kiswahili word, meaning group. This fits the society very well, as it is comprised of a group of people. They are usually women groups and they started off as social gatherings and avenues for saving money. The money collected is usually pooled together and invested in something that will earn the members a return.


  1. Flexible Loaning PoliciesChamas allow their members to borrow loans, at a lower interest rate that other financial institutions. They also make it possible for members to borrow large sums of money, but at a lower interest rate.
  2. Lower RiskChamas allow the members to invest in schemes, at a lower risk. This is because it has many members, who then share the risk amongst themselves, lowering it.
  3. Flexible ContributionsChamas tend to be flexible in their contribution requirements. One is expected to contribute, only what they can. This is helpful, especially to the lower earning population.


  1. Unclear goalsChamas are created for all kinds of reasons. One may find themselves in one that leads to financial drain as compared to wealth gain.
  2. Lack of accountabilityChamas are informal, it is therefore a bit difficult to hold parties accountable, in case any fraudulent, or such activity occurs.


SACCOs stands for Savings and Credit Co-operative Societies. These are bodies created by people who are like-minded, they have the same goal. In Kenya, SACCos are regulated by the Sacco Societies Regulatory Authority under the Sacco Societies Act.


  1. More Regulated – Saccos are regulated by the government. This makes them more accountable, as compared to Chamas.
  2. Lower Interest on LoansSaccos offer loans to the members, at a lower interest rates than banks and other financial institutions.
  3. High returns on depositsSaccos offer high returns on investments to its members.


  1. Limited ResourcesSaccos depend on the capital contributed by their members. This tends to be limited.
  2. Inefficient managementAlthough Saccos tend to be a bit more organized as compared to Chamas, in terms of management, they may still find themselves run by members who do not have the necessary managerial skills.

Unit Trusts

These are collective investment funds that are priced, bought and sold in units that represent a mixture of the securities underlying the fund.

A good example, are those in CIC Bank and Old Mutual.


  1. Lower riskUnit trusts are usually managed by professionals, who are able to take calculated risks and also who invest in diversified assets. This lowers the overall risk associated with the trust.
  2. Low initial investment Some Unit Trusts require as little as Ksh. 1000 as the initial investment. They are therefore very pocket friendly.
  3. Diversified portfolio Unit Trusts can be used for long-term or short-term purposes.


  1. FeesThere are usually additional fees that are associated with unit trusts.
  2. Illiquidity As compared to Saccos and Chamas are not as liquid

Other Saving Schemes

  • Pension Schemes
  • Fixed Deposit Accounts

Fun Tip

One may use the 50:20:30 rule, previously discussed, in order to determine how much of their income they should save. Learn more about budgeting here.


  1. https://www.investopedia.com/terms/s/savings.asp
  2. https://www.quicken.com/what-savings
  3. http://pocketsmart.org/financial_management/save/
  4. https://letsreachsuccess.com/the-importance-of-saving-money/
  5. https://www.investopedia.com/articles/personal-finance/031215/why-saving-money-important.asp
  6. https://www.thebalance.com/learn-the-most-important-reasons-to-save-money-2386123
  7. https://www.standardmedia.co.ke/article/2000018182/what-s-in-a-chama
  8. https://sokodirectory.com/2018/05/here-are-some-advantages-of-being-in-a-chama/
  9. https://www.standardmedia.co.ke/article/2000182899/pros-and-cons-of-chama-membership
  10. https://funnyardstick.wordpress.com/tag/advantages-and-disadvantages-of-saccos-co-operatives/
  11. https://finance.zacks.com/disadvantages-unit-trust-8520.html

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One may use the 50:20:30 rule, previously discussed, in order to determine how much of their income they should save.
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