Can you retire on your savings alone?

By Slyvia Jjuuko

Can saving alone tidy you up for the future? This is certainly determined by your current financial situation.

Cultivating a savings habit appears simple but not many people, including professionals with regular salaries, have any savings to write home about.

That notwithstanding, a number of people have chosen to go it alone, while others have formed groups.

Group savings initiatives are commendable, particularly for people with very low levels of income. Such savings come in handy as a buffer to cover medical emergencies, payment of utilities or even purchase of groceries for their households.

The ‘merry-go-round’ works for groups of people whose objective is to save for consumption.

Alternatively, if you have poor money habits that compel you to borrow for consumption, then getting into the habit of saving will avail you a buffer that can support the regular cash crunch you experience.

Its only when you have accumulated a reasonable nest egg that the objective of saving to invest makes sense.

However, if you do not belong to this category, then your objective for saving should go beyond consumption. It doesn’t make sense to forego some things now, only to spend all your savings on consumption later and go back to square one. On the other hand, if you are using a savings vehicle that doesn’t fetch any meaningful return, you are more or less stagnating.

That’s why it’s important to maintain value that is over and above inflation. If not, then you are getting negative returns for your efforts.

You should know by now that the ever changing environment may not support a merely prodigious saver, but one who can pick the right vehicle to multiply these savings.

In addition, your ability to easily convert the chosen asset class into cash should be considered.

If you still have doubts about the best vehicle that will give you impressive returns, negotiate with your financial services provider for a savings account that can fetch a high interest on your deposits.

A fixed deposit account is another option if you manage to negotiate considerable interest. Alternatively, you can purchase Government Treasury Bills and bonds. All these options are fairly straight forward and can be done without any worry of loss of money. The advantage is that you have an idea what level of return you will get after a specific period.

However, for a seasoned investor, these vehicles are considered low risk and low return.

Therefore, the hard work commences at a point when you want to take on more risk to achieve higher returns. That’s when you need to get the business acumen to determine where to deploy your savings so that they can grow through acquisition of more assets, which in turn generate income.

To get to this stage, you need to get educated, do more research and talk to role models to be able to form an opinion and possess the confidence to choose an investment that can meet your objectives.

This stage may involve taking risks and making some mistakes. Despite this, you are better off working out ways to expand your savings than having them eroded.

Many people hold a false sense of security, riding on the belief that their mandatory savings or the pension provided by their institutions is enough cover. This is a good excuse for not taking responsibility of their financial future.

Taking control of your financial life needs determination, hard work and constant learning and relearning financial knowledge among others.

It’s only then that you can take responsibility of the financial choices and don’t expect the Government, your company or relatives to bail you out of self-inflicted bad money situations.


The writer works with Bank of Uganda