PRINCIPLES OF SAVING: Guidelines To Making Your Savings Count.

Investment, both at personal and corporate finance is a function of savings. This in non – mathematical terms mean that investment depends on savings for it to take place. Therefore, a discussion about savings is as important as wealth creation. However, a simple majority of the people I have interacted with and shared a personal finance conversation seem not to be getting right the essence of saving and its guiding principles. In this column, I have summarized the basic principles of savings from my own school of thought.

The first principle; your savings must be intended and well thought. You should work to earn with the intention of saving just as you get motivated to get a job so that you meet your financial needs. Careful thought about your savings should answer questions such as why you should save, how to secure your savings and the rate of saving as a fraction of your income.?

Secondly; you need targets and deadlines in your journey of savings. This helps you to prioritize saving as important and urgent anytime you earn. Failure to adhere to this principle leads to postponement and loss of sight to your investment goals. Your savings target should resonate with your rate of savings and time available to mobilize investment capital. Track your progress regularly and invent ways to correct deviations from the success path.

The third principle is security. This is the most difficult principle to get right. Security of savings refers to measures employed to mitigate risks. The primary risk is inflation related to the time value of money whereby postponing expenditure to a letter date maybe met by increased commodity prices and loss of value of your currency against other major global currencies.?

Lastly is the principle of opportunity cost. While holding your money in anticipation of viable investment opportunities in the future, you may miss other investment opportunities available to you with better yields. This therefore requires you to seek information that helps you discern opportunities. Develop a habit of analyzing investment offers, be liberal enough not to shy away from emerging markets, educate yourself about various asset classes and let your risk appetite protect you from losing your savings while leading you to multiplying them through investments.