EDITOR’S NOTE: This article is part of our Money254 Partner Series produced in partnership with Umba to celebrate the launch of the fixed deposit savings account.
I turned 30 in June 2021. Life can move fast. I had always imagined that I would have my life figured out by the time I got to the third floor. I graduated when I was 24 and my dream was that by the time I turned 30, I would have a stable career, drive my own car, a tall-dark and handsome husband, and maybe have my 2 kids living in a beautiful suburb.
On the day I turned 30, I poured myself a glass of wine and sat on the balcony of my two-bedroom apartment in Ruaka. I started a mental checklist of the things I planned to have and the things I had. I had built a fairly successful career, now working as a sales manager at a phone distribution company.
I did not own a car and I was living in a rented apartment. My whole life rotated on my 18-month-old son, Jabari, whom I was raising as a single mom. This story is not about the absent father of my son. It is a story of gratitude even when the best-laid plans do not materialise.
Jabari is the apple of my eye, my joy of living - what the French refer to as joie de vivre. As I reflected on my 20s, I realised just how lucky I had been up to this point in my life. Driven by love and optimism, I set out a roadmap for my 30s. I had one overarching goal - to give Jabari the perfect upbringing and the best education I could afford.
I started becoming more deliberate in my savings, reviewing my budget every too often to see where I could cut costs. “Mama Jabari ulifaa ukuwe economist,” my helper Nancy, often teased me after our daily review of the household budget.
I didn’t stop at saving. I focused on my side hustles - taking advantage of every money-making opportunity that came my way. From selling nduma I grew on my mom’s farm, to partnering with my sister who works in Dubai to sell jewellery to my friends and colleagues - I did it all.
By December 2022, I had accumulated Ksh300,000 in savings. I was planning on building a solid safety net for my son’s education. Although he was set to start school in 2024, I felt that I was not moving as fast as I would have wished.
Things got worse in January when I started noticing my household budget was steadily increasing even without a change in our consumption patterns. I was getting tokens for the Ksh2,000 I spend on electricity every month, the cost of tissues, wet wipes, basic foodstuffs was going through the roof. Not even my great skills as an untrained economist would save me.
My first thought was to start a physical shop and expand my jewellery business - using the money I had saved for Jabari’s education. However, I had equally observed that even my friends and regular customers were spending less.
The jewellery I would previously dispose of in 2 weeks was now taking a month. Then there was the growing request for credit purchases, my sixth sense discouraged me from going this route. The difficult economic environment also saw me working for longer hours as our employer made every effort to survive what I had by now learnt was a global economic crisis.
The thought of having a passive source of income started creeping into my mind. I started researching common passive income ideas in Kenya. Rental income was the most common, but my Ksh300,000 was barely enough to buy a piece of land, leave along build a rental unit. I read about Money Market Funds (MMFs), Saccos, shares, bonds, fixed deposit accounts, and treasury bills. Nothing felt quite right.
One day I was catching up with news on my mobile browser and I saw that Umba, a Kenyan bank licensed by the Central Bank of Kenya, had launched a fixed deposit account that paid an interest rate of 16% per annum.
This is the highest rate I have seen being paid for a fixed deposit account. It also compares competitively to some of the options I was researching including MMFs and T-bills which had much lower rates. Sacco deposits had up to 15% interest, while bonds were within the same range as the Umba fixed deposit account, but required me to lock my money for prolonged periods of time with relatively lower liquidity.
I established that the deposits are insured by the Kenya Deposit Insurance Corporation (KDIC) and got assured by the CBK's regulation.
The long and the short of the story is that I decided to download the Umba App and try out the lock savings account for 6 months, as a start. The process was smooth as the bank is fully digital. I registered and created my account in less than five minutes. I shared my basic information, uploaded a copy of my ID and a live selfie, and within a few minutes, my account was ready and ready to take in my deposit. This was on March 1st.
Fast forward to September 1 and my savings had matured. My deposit was unlocked together with a payout of Ksh21,000 in interest. To say I was excited would be an understatement. I had initially planned to put back all the money back, including the interest.
However, my side hustle needed a quick cash injection to take advantage of the festive season when my sales usually go up. Fortunately, I was able to put back the Ksh300,000. This time, I locked it for a year. My maturity date is on September 3, 2024, when I will get a Ksh48,000 payout.
This will be enough to cater for Jabari’s annual school fees for 2025. Next year is already an easy process for me since his godmother, my sister in Dubai, promised to take care of his uniform. I have a chama payout for December this year which will cater for his school fees when he joins in January 2024. However, as things stand, with the passive income coming from my fixed deposits, I have a plan that I see will completely set me free from ever having to worry about school fees.
Even the money I use for my day-to-day activities, especially in my side hustle, I keep it in the standard Umba savings account where I earn 5% without locking. This is much better as it acts as my current account but pays me a small interest at the end of every month.
I plan on taking advantage of the December boom in my side hustles. I am due for a raise next year, although it may be delayed due to the economic environment. Still, if all goes well, I will have saved another Ksh300,000 by March next year. This will potentially see me earn Ksh48,000 in March 2025 after I locked it with Umba for a year. In total, I will be earning Ksh96,000 every year without breaking a sweat - one payout in March - and another in September (Umba allows you to open up to 5 accounts and you can even name them).
What is more,? while I do not foresee any financial need before the lock period lapses, Umba allows you to get back your money in the event of an emergency with no penalties or fines. You get the interest up to the point of withdrawal. Down the road, this will be an easy ticket for me to buy my first piece of land at Juja Farm - wish me luck!