In a world of many competing priorities, financial literacy can be described as the hunger to learn and effectively apply basic financial planning skills. This entails personal finance management, budgeting, investing, and planning for retirement.
Although this sounds simple, financial literacy levels among Kenyans are alarmingly low. A 2021 Global Financial Literacy Survey found financial literacy levels were low in Africa, with Kenya recording 38 per cent against 40 per cent in Tanzania and 42 per cent in South Africa. Cultivating financial literacy is a foundational step toward establishing a positive relationship with money.
Gaining financial literacy begins with a personal resolve to learn what it takes to be a successful investor. Individuals willing to build their literacy levels should read personal finance books, talk to financial advisers, listen to podcasts or subscribe to financial newsletters and magazines. These avenues give basic exposure to how to manage money, identify sound investment channels to grow income, and attain financial goals.
Becoming a successful investor will require an individual to evaluate their risk appetite and tolerance. Risk tolerance is the degree of risk an investor is willing to take up, given the volatility in a given investment. This understanding helps an investor identify opportunities that match their goals and comfort levels.
Unpacking short-term and long-term financial goals is key to defining the investment vehicle an individual will deploy to attain the desired result. An investment goal can range from saving for retirement, business expansion, education, or even a holiday.
For instance, a unit trust is a popular investment fund that pools money from different investors into one fund. The fund is invested in bonds or shares of businesses on the stock market. Unit trust reduces risk and diversifies investment by enabling individuals to spread their money across different portfolios.
An income drawdown fund is another investment vehicle that allows retirees to access regular income while allowing their retirement fund to generate investment income. The amount invested in this plan keeps growing even as an individual continues to access income from the fund. This investment plan is suitable for individuals seeking to have an income at retirement.
Lastly, an education investment plan is suitable for individuals whose goal is to save for their children’s education. An education plan provides a structure to invest in systematic installments toward a child’s higher education. The funds gain interest and help the contributor attain their financial goals.
Jubilee Insurance has developed different insurance, savings, and retirement solutions to enable individuals to receive value on their investments and plan for their future.
Individuals working on their investment goals should consider engaging investment professionals to identify opportunities that will yield profitable results while ensuring the attainment of the financial goals within the expected timeframe.
Investors should put money into what they understand. This will offer comfort and predictability during the investment journey.
Odera is the General Manager– Retail Life and Pensions at Jubilee Life Insurance Ltd