Short-Term vs Long-Term
For short-term goals (less than 5 years), savings are generally the better option due to their low risk and high liquidity. For long-term goals (more than 5 years), investing is usually more appropriate because it offers the potential for higher returns.
Striking a Balance
A balanced financial plan often includes both savings and investments. An emergency fund, ideally covering 3-6 months of living expenses, should be in savings. Beyond that, investments can help you achieve long-term financial growth.
Fun Fact : In Kenya, the concept of "chama" (informal savings and investment groups) is a popular way for people to save and invest money. These groups often start among friends, family, or co-workers and operate on a rotational savings system. While chamas traditionally focused on savings, many have evolved to become investment clubs that pool resources to invest in assets like land, stocks, or start-up businesses. This uniquely Kenyan approach has not only helped individuals save but also introduced them to the world of investment, often serving as a stepping stone to more formal financial practices.