How Ugandans save informally

October 31, 2024 will be World Savings Day. It is a day dedicated to raising awareness about the importance of saving money and financial planning. This year will mark 100 years since World Savings Day was first started by the World Society of Savings Banks on October 31, 1924, during the first International Savings Bank Congress in Milan.

I am reminded of a time in 2021 when the effects of Covid-19 were still being felt in the country. Viral videos of people having a good time were going around with the famous statement, “Make money and spend time to eat that money. Stop seeing a bag of cement in every shilling you make. If the money you make cannot solve your problems, eat that money!”

 While this statement was funny, it may have summarised the situation when we were unsure how the world would move forward in light of the pandemic: should one save the little they have earned and not see the light of day due to the pandemic? Or should one stick to their plan and save for that rainy day when the savings would be necessary to meet pressing demands?

 Well, an FSD report titled: "Banking and the Status of Financial Inclusion in Uganda: Insights from the FinScope 2018 Survey," showed that 81 percent of respondents had savings accounts, which was by far the most popular banking service.

 But only 2 percent of the respondents had fixed deposits, indicating that Ugandans were saving for short-term, rather than long-term, reasons, something akin to the ‘eat your money’ crusade that swept social media in 2021.

 The same report found that banks were the most popular avenues of savings, with findings showing that almost half of the banked Ugandans reported that the most important factor in choosing where and how to save was the safety of their money and how quickly they would access their savings.

 While Uganda has a working population of 15.9 million people, only 18 percent save with a licensed benefits retirement scheme, according to the Uganda Retirement Benefits Regulatory Authority. Majority of Ugandans either do not save or save informally in pots, boxes, or under their mattresses.

These figures tally with the statistics showing that gross domestic savings (savings as a percentage of GDP) in Uganda were reported at 19.21 percent in 2023, according to the World Bank collection of development indicators, compiled from officially recognised sources.

 Last year, during the Ugandan World Savings Day, the Bank of Uganda deputy governor, Michael Atingi-Ego, revealed that only 20.4 percent of Ugandans save to meet specific life goals such as retirement and education (Financial Capability Survey, 2020).

Tthese scenarios of someone who had ‘lost’ his savings at home. While some members scoffed at the idea of losing a box of savings, just this week on September 23, 2024, Uganda Police using their X handle reported a burglary incident involving the theft of a savings cash box (also known as ‘Kaboxi’) with cash amounting to Shs9 million in Bwera Mpindi village, Kisoka Parish, Kikamulo Sub-County, Nakaseke District.

 Luckily for the owner of the money, Bogere Jamada, the savings cash box was later recovered, with all the cash still inside. Bogere represents many other Ugandans who save informally, while millions of fellow Ugandans do not save.

At least 20 percent of one's income should go toward savings, another 50 percent (maximum) should go toward necessities, and 30 percent should go toward discretionary items. This is the 50/30/20 rule of thumb, and it provides a quick and easy way for you to budget your money.

Anthony Kituuka is the managing director at Equity Bank Uganda.