Young Kenyans don’t realize how rich they are. While they face higher unemployment, and older people ‘hold them back’ from higher paying jobs and leadership roles, they have something in their favour that others don’t -, and that’s “Time!”
With time, they have longer to save for their retirement, and it only requires a very small savings amount. Stats from the Kulegalega campaign, being done by the Retirement Benefits Authority (RBA), show that, if someone saves Kshs 1,000 per month, and that savings investment earns 10% per year, it will be worth over Kshs 2 million after 30 years. This is not another pyramid scheme or a lucky lotto number – it’s real-life math.
The answer is in the power of compounding interest. The interest they earn each year grows and is reinvested, to magnify the original investment. In the above examples, the savings a young man or woman makes will only add up to Kshs 360,000 (Kshs 1,000 invested 12 times a year, for the next 30 years). But over 80% (Kshs 1.6 million) of the above amount will come investment income and not from the initial contribution.
It’s more important to save when young, than what the amount that you save. An intern in a company should be able to save Kshs 1,000 per month. But, yes there are some who can, and should save much more than Kshs1,000 per month. If the intern has a boss who earns 10 times more than the intern and who saves 10 times more each month, he will end up with slightly more than his intern, because he started later. The intern’s boss will get slightly more than the intern’s Kshs 2 million even if he earns Kshs 100,000, but only starts to save Kshs 10,000 per month in the 10 years before he retires.
Finally, a common mistake people make when they retire is to start a business. RBA stats also show that 90% of business started by retirees will fail within 2 years. Retirement is not the time to start a business. So start investing and taking risks while you’re young and strong, and put something aside every month to be comfortable in retirement.