What you need to know:
- With a Sacco account, you can access a loan of up to three times your savings and utilise the funds to start the business.
- The Money Market Fund account will enable you to save up and compound your funds over time.
My name is Beth. I am 30 years old. I am not married but I have one child aged seven. I am currently selling ‘mahindi choma’ along the Nairobi highway near Limuru. I sell a piece at between Sh20 and Sh30. I can sell to about 50 people per day and make a gross of Sh1,500.
There are good days when I exceed this figure. On slow days though, I make a gross of between Sh450 and Sh600. If I buy a piece at Sh15 and buy charcoal at Sh50 per container, my net comes to around Sh650 on days when I sell 50 pieces. I sell these between noon and 5pm. From 6pm to 8pm, I switch to ‘mama mboga’ at a trading centre near my home.
I would like to grow and open a fast food and ‘uji’ business, however, I am not good at money management. I save the money on my M-Pesa and most times I find myself spending nearly all of my profit on personal expenses. I would also like to secure my child’s future. Please help me achieve this.
Alex Kibebe - the founder of Rubiani Wealth Management Ltd. He is an investment consultant and business development coach.
Trying to save up using M-Pesa can be quite difficult given that the funds are readily available for you to spend. I would therefore advise you to open a savings account that is less accessible.
And given that you have two goals – opening a Fast Food and ‘uji’ business and having a fund to secure your child’s future, I would advise you to have two different accounts to handle these two goals. More specifically, I would recommend that you open a Money Market account for your child’s fund and a Sacco account to raise capital for the food business.
With a Sacco account, you can access a loan of up to three times your savings and utilise the funds to start the business, while the Money Market Fund account will enable you to save up and compound your funds over time so as to have enough funds to cover your child’s future needs.
You can research and identify a Money Market Fund manager and a SACCO that will be ideal for your savings. Both accounts will allow you to conveniently deposit money via M-Pesa.
Given that your net profit from selling maize is between 250 and 650 and that you make some extra cash from selling groceries at the trading center, I would advise you to target saving on average Sh250 every day. If you do so, I would recommend that you save Sh100 to your Money Market Fund account and Sh150 to your Sacco account.
By so doing, you will have invested about Sh600 per week in your Money Market account and this will translate to a fund of about Sh33, 000 a year. As for your Sacco savings, you should be able to save on average Sh900 per week, which will come to about Sh48,000 per year.
If you keep saving in the Sacco account for another one year, you should have about Sh100,000 in your Sacco. You can then borrow Sh300, 000 to start your business. If it will require more capital to start the business, you can save up for some extra months before taking on the loan.
As you pay off your business loan, I would advise you to keep increasing your contribution to your Money Market (child’s fund) account. This way, you will have enough funds to cover your child’s current needs, while growing your balance to finance your child’s future expenses such as high school and college fees.
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