Growing Capital with Smart Saving and Investing- Investment led Mindset.

By Arthur Moses Opio @arthurkmo

On 30th December, 2023, Kakande Alex revealed in an article that Ugandan commercial banks mainly use our deposits as their capital. But they only give us an average interest rate of 2% in return. The problem? This puts the banks at an advantage and leaves those who deposit funds at a disadvantage.

Kakande suggested that we, individuals of the private sector, were enabling this situation by using bank deposits as our main form of saving. But knowing that money in a bank loses value every day, it poses the question, why do we continue this?

A news report from January 2024 showed that inflation in Uganda reached 2.6%. This means if you saved money in a bank at an interest rate of 2%, you basically only earned a 0.6% return on your savings, which was then subject to tax. Compare this to a Unit Trust, which could offer up to a 10% return - a much smarter investment!

This can be boiled down to a simple concept: cash held in banks loses value over time. However, investing in appreciating assets, such as Unit Trusts or Treasury bonds, protects and grows your money.

Transferring from just saving to smarter investing might seem daunting, but it's pretty straight-forward with some financial education. Plus, the pay-off is worth it. According to a report, Uganda has a lower saving rate than Kenya, Rwanda, and Tanzania. But the point isn't the comparison, it's about understanding saving is only the first step. You need to move beyond just saving and start investing to realize your financial goals.

Ultimately, changing your financial thinking opens up more opportunities. Self-education is key, from understanding different investment vehicles, recognizing market trends to learning from past investment experiences. Moreover, don’t be discouraged by past mistakes or fear of future ones. Instead, focus on creating robust financial plans for your future.

In short, shift your thinking and explore smarter investment opportunities like Unit Trusts. They might seem unfamiliar, but they can provide better returns than traditional savings accounts. Remember, it's not just about keeping money in a bank account - it's about growing your money. A change in mindset is the first step towards achieving long-term financial success.

Arthur Moses Opio is the End User Administrator at the Directorate of ICT Support (DICTS) at Makerere University. He has over 10 years of experience in system administration from different organizations, where he developed expertise in directly interfacing with end users to optimize the institution's knowledge base and user online experience. He completed a Master of Computer Science majoring in Security at Makerere University. He is passionate about personal finance and writes a blog on thoughts to Transform, Impact and Empower lives in the area of personal finance, personal development and leadership.

Alex Kakande