Why Financial Literacy is the Best Investment (And Why We’re Missing Out!)

Let me share a bit of my journey: I didn’t start with a perfect financial game plan, and it’s still far from flawless! In the past, I held onto worthless shares instead of cutting my losses, got scammed by shady crypto projects, and spent money on material things that didn’t add any lasting value. Weekends were all about “living large” and getting “lit!” I should have known better—after all, I was financially literate. But it wasn’t until I went back to basics, changed my mindset, set up a solid long-term plan with risk management, and continued my financial education that I had a breakthrough. I found my purpose and saw, more clearly, just how widespread financial illiteracy really is.

We all have friends, colleagues, and family members who are just bad with money. I’ve met bankers who were clueless about personal finance and investments, which is ironic considering they’re trusted with people’s money! Financial literacy isn’t just about knowing the terms—it’s a mindset shift. Without it, people miss out on the power of compounding interest, “the 8th wonder of the world!” Yet ask the average person, and they may have no idea what that even means.

This is why I teach my kids about investing, saving, long-term growth, and the difference between needs and wants. They’ll still make mistakes, but knowing helps them handle life’s financial ups and downs. When it comes to choosing between splurging on a fancy car or investing that cash, I want them to weigh the immediate gratification against the value of watching their money grow.

Let’s start with the basics: Imagine driving a car without knowing the road rules. Now, picture trying to navigate the world of personal finance without understanding interest rates, budgeting, or investment options. It’s the same chaos. Financial literacy is the roadmap to financial independence, yet in Tanzania (and globally), many are cruising without a map. Here are a few points to break down why financial literacy matters and simple ways to get started.

1. Know Where Your Money is Going

First, let’s tackle an all-too-common scenario: not knowing your monthly household budget. I get it—tracking every shilling feels like a chore. But without this basic financial picture, how can you plan for the future? Too often, people find themselves asking, “Where did my money go?” rather than telling it where to go.

Quick Tip: Set up a simple budget. Apps, Excel sheets, or even a good ol’ pen and paper can do the trick. List income on one side, and expenses on the other, and be honest about those “casual splurges”!

2. Forget the Car Payments, Think Compound Interest

Cars, and designer clothes…they’re fun but fleeting. Now, think of what your money could do if invested wisely. Compound interest is one of the most powerful (and least celebrated) forces in finance. It’s the simple concept of earning interest on interest—your money grows faster over time.

Real-Life Math: Let’s say you invest TZS 10,000,000 today at a 12% annual compounded return. In ten years, that initial amount would grow to TZS 31,058,482. That’s more than three times your starting amount! Now, imagine you add to it monthly—even a small amount. With compounding, those numbers can skyrocket, creating real, lasting wealth. Meanwhile, that car would have likely dropped in value by about 20-30% in just the first year—and even more over ten years. Instead of growing your wealth, you'd be watching it steadily shrink in value.

3. Invest in Index Funds – Simple, Smart, and Low-Cost

If you’re looking for a hands-off investment, index funds are worth exploring. These funds mirror the performance of a stock market index, like the S&P 500, and provide exposure to a broad mix of stocks with lower fees.

Why They’re Great: Diversification! You’re not putting all your eggs in one basket, which reduces risk. And while markets can be volatile, a long-term approach to index fund investing has shown stable returns globally.

4. Public Funds vs. Private Funds: Which is Which?

Tanzania is developing more options in both public and private investment funds.

• Public Funds: These are funds available to all investors, for example, the Unit Trust of Tanzania (UTT). They’re generally regulated and offer a "level" of transparency that can make newcomers feel secure.
• Private Funds: Private equity or hedge funds require higher minimum investments and cater to accredited investors. They can be riskier but also potentially more profitable.

Know What Fits: Not every fund is for everyone. Public funds tend to be safer for beginner investors, whereas private funds may appeal to those with a higher risk tolerance and deeper pockets.

5. Treasury Bonds—Guaranteed Growth

Treasury bonds are a great way to invest without sleepless nights. They’re issued by the government, which makes them low-risk compared to stocks or private investments. In Tanzania, you can invest in 2, 5, or even 10-year bonds. The catch? You’ll need some patience since they’re not as liquid as cash, but the reward is steady interest.

Quick Note: Treasury bonds are great for those looking to preserve wealth and grow it slowly, especially if you want that “peace of mind” factor in your portfolio.

6. Passive Investments & Real Estate – Research First!

There’s a growing trend of people investing in real estate, seeing it as the ultimate status symbol. But before buying that plot of land or flat, ask, “Does this property align with market demand?”

Real Estate Tip: Look beyond the shiny new apartment or beachfront land. Research whether it’s actually generating rental income or if you’ll be sitting on it, waiting for a buyer in a low-demand area. Passive income through real estate is fantastic, but only if your property is desirable.

Final Thoughts: Financial Literacy Is a Superpower!

Understanding finances isn’t about taking all the fun out of spending. It’s about making smart choices that allow you to enjoy today and build a solid future. Prioritize learning the basics—like setting a budget, investing early, and knowing your options for growth. And remember, the most successful investors aren’t the ones with the flashiest cars; they’re the ones who let their money work for them while they sleep!

AS ALWAYS THIS IS NOT FINANCIAL ADVICE. DO YOUR OWN RESEARCH