Seven things to know about how Kenya’s emerging affluent manage their money

Nairobi, Kenya

The “emerging affluent” – those earning enough to start saving or investing – are a crucial engine of economic growth in Africa and Asia. They have many pressing reasons to save: longer life spans, the rising cost of education and healthcare as well as the need to buy property.

A recent report by Standard Chartered bank studied the saving habits of these consumers. It offers some interesting insight into their aspirations and how they manage their money to get there.

How we made it in Africa takes a closer look at how the emerging affluent in Kenya, the only African country included in the research, are preparing for the future.

(To be classed as “emerging affluent”, respondents’ monthly household income had to be a minimum of Ksh.100,000 (US$969) before tax. Asset ownership and activities – such as cars, refrigerators, TVs and internet access – were also taken into account. The sample size included 1,000 Nairobi residents.)

1. Regular savers. Some 79% of emerging affluent Kenyans contribute towards their top savings priority on a monthly basis, while 94% are confident that they will reach their savings goal.

2. But they follow a relatively basic approach to saving – 74% keep money in a savings account and 35% have fixed-term deposits. The adoption of more sophisticated savings methods are relatively low, with only 6% of those surveyed investing in stocks, 10% in property, 2% in fixed-income securities, and 5% in company pension funds. However, only 2% of Kenyans store their cash at home – significantly less than in Pakistan where this is a popular practice among 50% of the emerging affluent.

Standard Chartered says that by just moving one step up from their preference for basic savings accounts or cash to fixed-term deposits, Kenyans could be earning 25% more over 10 years.

3. Few use digital tools and services to manage their finances. Despite the perception of Kenya as a technology hub, only 6% of respondents said they frequently use digital tools for financial management. This compares to an average of 23% in the other countries included in the research. A quarter of respondents said the reason why they are not using digital tools is because “they are not familiar enough with the technology and need advice on how and when to use it”.

4. Some 60% of Kenyans cite friends and family as a source of financial management information, followed by financial institution/bank websites (49%) and financial planners (34%).

5. Kenyans are entrepreneurially minded, with 9% of respondents saying their top savings priority is to start or fund a business. This is above the global average of 6%, with only China, at 12%, scoring higher than Kenya in this regard.

6. Owning property is a significant objective. Some 15% of Kenya’s emerging affluent regard buying a home as their most important savings goal. This figure is slightly higher (18%) among millennials (25 to 34 age bracket). However, Kenyans’ enthusiasm for property ownership is below that of territories such as Korea (25%), Hong Kong (24%) and Taiwan (21%).

7. But saving for their children’s education is an even greater priority. Almost a quarter (23%) of Kenyans regard children’s education as their top savings ambition.

“Typically, the emerging affluent prioritise children’s education because there is an expectation that the younger generation will support their parent through retirement,” notes the report.