Here’s how you can build a secure financial future one step at a time

You might be at a stage in your life where you are starting your financial journey or probably seeking to improve your skills in financial management.

Either way, it is critical for you to comprehend the basics of savings for you to be able to build for yourself a secure financial future.

Through this article, we will take you through the fundamental principles of savings and provide practical tips to enable you to get started on your path to financial success.

Set Clear Goals

It is very important to set clear financial goals for yourself before you start your savings journey.

You will need to define your short-term goals (eg saving for a vacation), mid-term goals (eg saving for a home deposit) and long-term goals (eg saving for your retirement).

Setting specific objectives will motivate you to save more consistently and be able to stay on course.

Track Income and Expenses

To save your money effectively, you need to understand your cash flow and you can start this by tracking your income and expenses for a month.

After you track your cashflow, categorize your spending to enable you to identify areas where you can reduce spending and reallocate more funds toward your savings goal.

Create a Budget

When you have a vivid picture of how your finances look like, create a budget to help you efficiently allocate your income, by ensuring you have enough cash for your needs as you set aside money for savings.

In your budget, include both fixed expenses (eg rent and utilities) and variable expenses (eg groceries and entertainment) but you need to be realistic about your own spending habits.

Pay Yourself First

Always pay yourself first by putting aside a significant part of your income for savings, as a matter of priority, before you settle any other expenses.

Establish automatic transfers to a separate your savings account to make it easier to save consistently.

Many banks have products and efficient technologies that give you flexibility and convenience as quality services can be accessed both within and outside working hours.

For example, Equity has a Digital Savings product on it’s Equity Mobile and Equity Online platforms and customers can get information on available savings products, open savings accounts, transact and engage with their accounts without visiting any bank branch.

Apart from the convenience and flexibility available to customers, the Digital Save product offers interest rates on the deposited amounts.

The interest rates are tied to the amount saved in a savings account; the more you save, the higher the interest rates offered.

Cut Your Expenses

Identify areas where you can reduce your expenses without compromising on your needs and look for ways to save on everyday items like groceries, transportation and utilities.

Consider negotiating bills, finding cheaper alternatives, or eliminating unnecessary subscriptions. Even small savings can add up over time.

Reduce Your Debt

High-interest debt can hinder the progress of your savings plan so prioritize paying off debts, starting with those with the highest interest rates.

By reducing your debt burden, you will have more disposable income to allocate toward your long-term savings plan.

Embrace the 50/30/20 Rule

The 50/30/20 rule is a popular budgeting guideline in which you allocate 50 per cent of your income to essential expenses (eg housing, groceries), 30 per cent to discretionary spending (eg dining out, entertainment), and 20 per cent to savings.

Adjust the percentages based on your own goals and priorities but make sure you save!

Build an Emergency Fund

Establishing an emergency fund is very important to protect your financial stability given life is unpredictable.

Target to save three to six months' worth of living expenses in a separate account to provide a safety net during unexpected situations, for example medical emergencies or job loss.

Explore Different Savings Vehicles

Try and explore other savings vehicles that offer higher interest rates or tax advantages even as traditional bank savings account is a safe option for many.

Consider options like fixed deposits, individual pension schemes or boosting contributions to your corporate pension scheme, or investment vehicles like stocks and bonds.

To be able to make informed decisions based on your risk tolerance and goals, conduct a lot of research and consult a financial advisor.

Stay Motivated

To save money consistently you need a lot of discipline and perseverance.

Celebrate small wins along the way and stay motivated by regularly reviewing your savings progress.

Set milestones, reward yourself for reaching savings goals, and remind yourself of the long-term benefits of financial security.

Securing your savings account

Keeping your savings safe from fraudsters is as important as the savings itself.

When using mobile banking, never share personal information like usernames, passwords, PINs, or OTPs with anyone to avoid fraudsters breaching your accounts.

Similarly, avoid storing sensitive data on your mobile devices to prevent theft or loss and report any connectivity or SIM card issues promptly to prevent SIM Swap fraud.

For mobile app users, always sign out of your banking app instead of just closing it.

Log off or sign out of online banking sessions to protect them against unauthorized transactions if your device gets compromised.

Also regularly update your mobile banking app to receive enhanced security features and ensure the software in your device is up to date.

Giving priority to these measures will protect your bank accounts from digital fraudsters.

Finally, know the numbers your bank contacts you from (for Equity Bank customers, that number is 0763 000 000), and never share your Mobile Banking or ATM Pin, OTP, Usernames or Passwords with anyone. Kaa Chonjo!

By implementing these basics of savings, you can take control of your finances and consistently and patiently build a solid foundation for your future.