A third of Kenya’s middle class are a heartbeat away from poverty. Their spending power has been destroyed by inflation and a near famine that has increased the price of basic foodstuffs. This comes amid surging living costs, which have seen many Kenyans trim shopping budgets and triggered a cut in demand for non-essential goods.
For a long time – specifically since 2005 – the Kenyan middle-class has benefited from the economic boom that has seen Kenya’s economy grow at an average of five percent annually.
Who are the Kenyan middle class? According to the Kenya National Bureau of Statistics (KNBS), Kenya’s middle class includes anybody spending between Sh23,670 and Sh199,999 per month. However – African Development Bank, on their part, say it is anybody with an annual income exceeding Sh331,500 ($3,900) or who spends between Sh170 ($2) and Sh1,700 ($20) a day.
We know them by the fuel-guzzlers they drive, their showy display of affluence; with a taste for the finer things in life: food, drinks, cars, residences, and dressing. They furnish their houses with luxurious, often contemporary furniture – wooden floor finishing, Italian kitchens and big screen TVs that enjoy premium pay TV channels. We know them because they generally live in upper market areas like Kilimani, Lavington, Kileleshwa, Hurligham etc
They are estimated to be between 20% to 40% of the population in Kenya. Their growth is driven by factors like:
- A strong desire for upward mobility
- A focus on education and professional development
- A commitment to entrepreneurship and innovation
- A strong consumer base
Kenyan Middle Class and Saving
Are they saving? Yes – but not at the rate needed to secure their financial future. A study by the Kenya National Bureau of Statistics (KNBS) found that only 15% of middle-class households save regularly. This is significantly lower than the savings rate of the upper class (30%) and the lower class (25%). This is driven by their higher spending habits, especially on consumer goods and services. They also face higher costs of living such as housing, education, and healthcare because of the choices they make. In addition, many of the middle-class Kenyans are straddled with debt with they struggle to repay – presenting them from saving. Finally, they like many Kenyans, lack financial education around making sound financial decisions, including understanding the importance of saving money and how to do it effectively.
Tips
So how can middle-class Kenyans build a successful saving culture: Here are some thoughts:
First is to encourage them to set clear financial goals. Whiles it’s easier said than done, when a clear saving goal is established and agreed upon, the chances of saving increase significantly.
Creating a budget and sticking to it is key. This means tracking your income and expenses so you can see where your money is going. Once you know where your money is going, you can start to make changes to free up more money for savings.
Automating savings can put you on the path to saving. This would mean setting up a system so that a certain amount of money is automatically transferred from your checking account to your savings account each month. This will help you avoid the temptation to spend the money and will make it easier to reach your savings goals.
Also Read: Finance Bill 2023: The Pros and Cons of Proposed Amendments
Find a savings partner. Having someone to save with can help you stay motivated and on track. You can set up a joint savings account or simply check in with each other regularly to see how you’re doing.
Reward yourself for your savings. When you reach a savings goal, reward yourself with something you’ve been wanting. This will help you stay motivated and make saving a habit.
Consider using a chama. Since they are typically made up of people who know each other, such as friends, family, or colleagues, and they meet regularly to contribute money to a common pot, this can be a great way for the middle-class to save their money.
As the middle-class Kenyans look to develop a successful savings culture, it is important to be aware of the risks of saving. There are a number of risks associated with saving, such as inflation and market volatility. It is important to understand these risks and to take steps to mitigate them.
