Expert Opinion Column

Posted on January 15, 2023

Question by XXX: I earn about K Sh 300,000. I save very little because all my money goes to school fees. I am in a dilemma, should I change my kids to cheaper schools to save for investment and retirement? Or should I ensure they get the best education and hope for the best in retirement? Is there a percentage guideline of how much I should spend on school fees?



Dear XXX,

Thank you for speaking on behalf of many! The dilemma you are in reflects a deeper challenge that many people go through. It is a pointer to the question of whether success in life is determined by how much one earns or by how well one manages whatever amount they earn. I believe that the latter is true. Success and contentment in life is determined by how one manages the little that comes into their hands.

w You have mentioned that you earn about K Sh 300,000. I will assume that this is your monthly income because people rarely quote their annual or quarterly incomes. You have also not stated whether this is your gross or net. Having a view of how much you earn is a great thing as it puts your income into perspective. This is usually the first step in the art of budgeting. The next step requires you to take control of where your money goes. I am glad that in your question you seem to be exploring a solution that leans more towards controlling or adjusting your expenditure as opposed to agitating for an increase in your earnings. Improving your financial management skills will yield better results than a simple increment in your earnings.

Those who live their lives agitating for higher earnings always become restless, stressed, and impatient at their present workplaces. Financial literacy and being smart on money matters can be linked to better job satisfaction and employee loyalty. Poor financial management leads to discontentment, impatience, subconscious greed, corruption and crime.

Alternatively, one may end up living a miserable life feeling they are among the less privileged (overworked and underpaid), yet they in actual sense are among the few most privileged people in society today. I hope you appreciate that you are among the few top earners in Kenya today. Your earnings place you among the 79,909 Kenyans who earn over K Shs 100,000 according to recent statistics. This accounts for only 2.9 percent of the 2.7 million formal workers captured in the Kenya Revenue Authority (KRA) database.

I am also glad that you do not seem to be too happy with your level of investment or retirement savings. You call it very little. In your view, it appears that school fees seems to be taking the larger share of your expenditure. You have however not shared how it compares with the other expenditure lines that you incur on a monthly basis. I am sure you have other expenditure lines which fall into the categories of basic needs, wants, debts and entertainment among many others.

I feel that your problem revolves around budgeting. This will be best addressed by seeking the help of a financial advisor or financial literacy coach who will help you build on your budgetary skills. The art of budgeting requires a careful diagnosis of your entire earnings and spending patterns to weed out the unnecessary financial habits while strengthening what is financially helpful. The steps of budgeting will follow a carefully laid plan that looks into your income sources, tracks your expenditure patterns over an agreed period, helps you to decide on your current financial priorities and designs a new budget framework that suits where you are in your financial journey. For future success, it will teach you how you can always track your future expenditure and refine your budget accordingly as your circumstances change with your life stages.

A good financial planner, financial advisor or financial literacy coach will help you determine which budgeting pattern suits you. There are several budgeting patterns that range between the 50:30:20 rule, the 50:40:10 rule and the 70:20:10 rule which are commonly referenced. They help you to divide your monthly after tax income to determine what goes into basic needs, wants, savings, investment, insurance, debt, etc. • 50% (Basic Needs) :30% (Wants) :20% (Savings/ Debt) • 50% (Basic Needs) :40% (Savings, Debt, Investment) :10% (Wants ) • 70% (Living expenses) :20% (Savings, Debt ) :10% (Investment, Charity)

The outcome of this professional intervention will determine whether you will need to change the school your kids attend currently to a cheaper one or not. Do not be surprised if the diagnosis reveals that the solution to your current financial pain-point lies somewhere else in your other expenditure habits and patterns.

But kudos for being a responsible parent. Education is the best inheritance that a parent can accord their children. My only advise at this point is that you may need to take care not to over-spend in their basic education at the expense of saving for their future tertiary education and training. Try and save for these as the real school fees burden awaits you yonder.

Lastly, I hope you are not heavily invested in their education today thinking that you have them as your retirement plan. Your children are not your retirement plan! There are high chances that thinking of them as your fallback in retirement will backfire. Make separate retirement arrangements and you will thank me later!

The writer is a financial literacy trainer and General Manager in charge Umbrella and Retail Retirement Solutions at Zamara. He can be reached via