To Save, or to Consume; That is The Question.

“Whenever I start saving so that I expand my business, somethings comes up and I use all of my money” said a sole proprietor.

How many times have we been in such situation? We have set aside a fraction of our income for our children’s education, our business expansion or our holiday plan but the goals fall short from a medical bill, our consumption habits and many other reasons best known to you.

We are often castigated for having a poor saving culture and some say we “lack saving discipline”. Our recent household survey The Saving Cultureprovides us with holistic insights about a large percentage of Kenyans who are at the crossroad between saving for future activities or living through the day.

The insights covers major thematic areas which informs a decision to either save or consume.


Survey Number: 2

Number of Respondents: 220

First, let us review our decision to save based on a random sample of the Kenyan population selected from 47 counties of Kenya. 81.4% of the respondents save money compared to 18.6% who generally don’t

What factors affect an individual’s decision to save or not save?

This question leads me to our second insight. Monthly income and expenditure. According to Keynesian economics Kenyan marginal propensity (resulting from small increase of income and tendency) to save is lower than its marginal propensity to consume. In other words, an increase in one unit of income is consumed rather than saved. A unit increase of income for lower income earners will not cause a significant change in their saving habits. In fact they will cut on their savings and use them to upgrade their lifestyles, investment and other consumption activities, as expressed below:

It is interesting to note that over 50% of the lower income earners save. They responded Yes to saving as compared to less than half of those who did not save.

How or where do they earn their income?

Our third insight answers this question. 26.3% of the respondents work in the informal sector while only 20.5% are employed as compare to 29.4% who are unemployed or self-employed.

This tells us more about their lower income level and their saving culture. That is those who work in informal sectors, unemployed and self-employed have lower income levels and their saving habits tends to change when their income increases. They save less when their income changes from lower to middle or higher income.

Allow me to bring the age and marital status as factors in this conversation. Does age affect Kenyans savings habits?

The obvious answer is yes but how? 93.9% of the young adults between age 18 and 35 save as compared to 6.1% of the middle aged and adults who are over 36 years of age.

Majority of these group of young adults have regular saving accounts, they are single and this imply they have little or no family responsibility.

81.4% of the the population who save are singles.

Lastly, the final analysis is on the education. Over 75% of the population that saves, has a university or college degree. The level of education enhances and emphasises the importance of saving. That is why majority of those who are educated have a savings plan.

This is where majority of the respondents save their money.

In conclusion, we all need money and many of us feel we don’t have enough of it. It is important we set aside a fraction of our income in our saving accounts irrespective of the size of our income, our age group, marital status and our education level.

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