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What to Do With Your Savings at The End of The Year
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What to Do With Your Savings at The End of The Year

After an end-of-year financial checkup, you realise you have saved some money. What next step should you take? 

It can be tempting to splurge your savings, especially if you have not been saving for a specific purpose. You might want to hop on a bus or train and go for a vacation, but before you do that, you should consider some beneficial ways to use your money.

Using your savings in a beneficial way involves utilising them in a manner that will be helpful in the long run. For instance, using your savings to go on vacation can make you happy now. But using it to pay your auto loan will help you lower your debt burden and to ensure you save more in 2023. 

There are multiple ways to use your savings, and it all depends on your financial goals. Your savings should help you get closer to accomplishing your goals and keep you on track to achieve financial independence. 

This article will discuss what you can do with your savings at the end of the year to ensure you don't let your hard-earned money go to waste.

Read Also: How To Boost Your Monthly Savings

5 Things to Do With Your Savings at The End of The Year

Read Also: How To Turn Your Savings Into Investments

Invest your Savings 

Saving money is important, but if you want your savings to outpace inflation and increase value, you must invest it. Investing your savings is, in simpler terms, using your money to make more money. Investing allows you to build wealth and accomplish your goals faster. This is made possible by two concepts: Compounding and risk-reward tradeoff.

Compounding is when an investment’s earnings, e.g., interest or dividends, are reinvested to generate more earnings. If, for example, you invest in money market funds and earn interest of 10%, you reinvest it instead of spending that interest. This allows you to earn interest on your initial investment and your interest. 

While compounding can help you build wealth, you will be required to start investing early and invest in the long term to reap the maximum benefits.

The second concept is the risk-reward trade-off. Every investment carries a degree of risk. That is, your investment might produce less than expected returns, or you might lose initial capital. 

In the risk-reward tradeoff, investors are rewarded based on the amount of risk they take. The higher your chances of losing money, the higher the potential rewards. To understand how much risk you can take, you need to know your risk tolerance– how much volatility can you bear to achieve your objectives? Your age, financial goals, time horizon, and portfolio size will inform your risk tolerance.

Read Also: Investing for Beginners: How to Get Started

Grow your Retirement Fund

As the year ends and you plan for holiday activities like gifting and travelling, you should check your retirement account. Did you direct enough money to your retirement fund this year to keep you on track to achieve your goals? If you didn't, you should consider using your savings to top it off.

Retirement planning is a critical part of financial planning as it ensures that you protect your future and stay self-reliant in your sunset years. With it, you might be able to generate income and finance your chosen lifestyle. 

Depending on how you invest for retirement, you can grow your nest egg in different ways. If you have a pension scheme, you can max it out by contributing the maximum allowed annually; if you're saving in a SACCO, you can contribute as much as possible, and if you are investing in real estate, you can direct your money into it.

If your retirement account is up to date, you can use your savings to boost your other financial goals. You can direct the money to those goal savings accounts like a house downpayment or your kids' education. And if you are behind on all your goals, you will have to make the hard choice and prioritise depending on your needs.

Read Also: Early Retirement: Is It Possible?

Lower your Debt 

While it's best to avoid using your savings to pay off debts, there are times when it's advisable. Paying off debt using your savings can put you at risk of going into debt again when you experience a financial emergency like loss of income. Additionally, investing your savings can allow you to generate more money to service your loans.

Nonetheless, paying debt using your savings also has its benefits. For starters, it can allow you to save more in the coming year and give you peace of mind. Second, paying off debt can save you from paying interest in the long run.

So should you invest your savings or use them to pay off debt? Here are three things to consider when choosing what path to take:

  1. Your debt has high interest - If your debt is costing you much more money to service, especially given the increasing interest rates, you should use your savings to pay it off.
  2. You have a reliable source of income - If you are confident that your income will not be interrupted and you won't struggle to pay bills, you can use your savings to tackle debt. You should ensure you have backups like passive income, rainy day funds, and adequate insurance.
  3. You are on track to achieve your financial goals - If your other goal savings accounts are up to date, you can use the extra money you've saved to lower your debt.

Read Also: 8 Easy Ways to Pay Off Your Debt Faster

Build your Emergency Fund 

Emergency funds, also known as rainy day funds, are money set aside to finance unexpected expenses brought about by financial emergencies. This fund allows you to ride out unavoidable financial troubles like income loss or extended illness. An emergency fund provides a cushion so that you don't have to use your goal savings account, liquidate your investments, or go into debt to pay for your medical emergencies or the funeral costs of a loved one.

It's common to confuse your savings with emergency funds. You will find that most people usually have savings but lack a rainy day fund. Therefore, they dig into their savings whenever they have an unexpected bill to pay. This is not advisable. You should build an emergency fund, keep it separate from your savings, and give your savings a purpose.

How much you keep in your emergency saving will depend on your financial needs and job security. As a rule of thumb, you should have enough money to finance three to six months' expenses. If your monthly living expense is Ksh35,000, use your 2022 savings to build an emergency fund of at least Ksh105,000.

Finally, you should keep your emergency funds in an easily accessible account and gradually increase it over the coming year.

Read Also: 6 Consequences of Not Having an Emergency Fund

Invest in Yourself 

This process involves using your savings to improve your life and earnings and expand your knowledge and skills. Self-investment is particularly important if you are still finding footing in your career or looking for ways to increase your income.

There are different ways to invest in yourself. The best one is to sharpen your existing skills and learn new ones. You can achieve this by either going back to school to increase your education level, going to TVET to learn hands-on skills, taking online classes to keep up with changes and trends in your profession or attending seminars and conventions to learn soft skills.

Investing in yourself will allow you to become a valuable member to your employer. This can help you earn a promotion or a raise in salary. Additionally, you can get better-paying jobs, and in case you lose your job, potential employers will likely consider you.

Learning new skills can also help start a side hustle that could help you create a new source of income. If you, for example, learn carpentry, you can open a small workshop and start building tables, chairs, and shoe racks in your free time. You will then sell them online or to friends and neighbours.

Read Also: 10 Long-term Financial Goals to Start Today 

What Not to Do With Your Hard-Earned Savings 

If you don't put your savings into good use that will help you achieve your financial goals, you might find yourself tempted to use them in bad ways. If you don't use your savings smartly, you might misappropriate them. To avoid that, ensure that you:

Don't loan out your savings: Friends and family might bring you enticing proposals to lend them money, and they'll return it with good interest. This can be tempting, especially if you want to make quick money. But you should weigh the dangers of giving out unsecured loans to loved ones. You might lose your money and be forced to write it off.

Don't Spoil Yourself: With the extra money, you might want to go on a shopping spree to buy a new TV or cooker, go on a vacation, or spoil yourself silly. However, you should avoid that. Whether you want to buy new appliances or go on a holiday vacation, you should be planning and saving on those goals. Your end-of-year savings should only be used in a way that guarantees long-term gains and protects your future.

Don't put your Money in a savings account: Unless you are saving for a short-term goal or emergencies, you should not put your money in a savings account. This is because they typically have low returns that don't keep up with inflation and their accessibility makes it easy to spend. If you haven’t decided how to use your end-year savings or are fearful of investing, you can explore multiple low-risk investments, from SACCOs to MMFs.

Read Also: The 10 Biggest Investment Mistakes to Avoid 


After struggling to save for the whole year, blowing your money or using it the wrong way now could be a shame. It could be undoing all your hard work. Your priority should be to look for ways to get the most out of your money. And that starts by identifying your immediate and long-term goals. This will allow you to decide how to use your savings.

If you hadn't separately saved and planned for the holidays, you might have to dig into your savings. But you should do it with moderation and prioritise your goals. Moving forward, you should also separate your savings. That is, have a separate account and save for your goals separately.

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Farah Nurow is an experienced Content Writer who enjoys writing creative and educative articles meant to provoke readers' thoughts. He loves sunny weather and thick books. You can connect with him on LinkedIn.

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