 back as promised entrepreneurship Tuesday on why in the morning I'm your host by Moses or it's by morning of social media platform and this is our last interview of the day so I saved the best for last and if you've been wondering on how to spend your money or how to invest your money this one is for financial literacy and I have the main man himself Mr. Michael Obaga who's an asset management specialist a banking and insurance specialist and the list goes on so I'm going to let him introduce himself so we can carry on Karibusana thanks buddy thanks for having me all right your camera is number four right there at the list your your credentials are pretty picturesque I can't list everything so I'm going to give you an opportunity to say it yeah my name is Michael and my name is Michael Obaga and I work for site on investments however looking at my bio I have a career arc of about 10 years in private wealth advisory and you're looking at relationship management in banking insurance and asset management and you know a brief you know experience in the pension world as well therefore that one ideally captures the financial sector cross board therefore we have great facility of experience and advisory when it comes to financial matters all right especially when you're talking about the young people and investment which is our audience for that matter and I'm so glad to have you as a young person as well who understands at this I'd like to get your background first what is your background how did you get to this point of knowing so much about the financial market I remember immediately after college I graduated from Jomokenya to university I immediately got a job in a circle which was actually a building society I remember you're dealing with farmers we're going down into the villages to pay farmers who are cultivated tea coffee and all that so I worked my first job into the financial industry I was introduced by a circle later on what were you studying at Jomokenya at Jomokenya I studied applied mathematics however you know the current economic status of Kenya you have to be well advanced to work in any industry where fate will land you and I remember immediately after graduation I said I'm not going to hold back to wait for a career in mathematics rather I'll take any job that that will come by but I'm told the financial markets of the industry is hungry for for guys with knowledge in mathematics exactly so it came in as an extra advantage especially now that I was good in math therefore I placed myself in a very strategic position by taking up these duties especially in the financial industry all right thank you very much for coming and my first question is going to be about this financial literacy thing people have been complaining about it it being included in our curriculum or parents teaching their kids this thing so everybody's pointing a finger I'd like to know the first class of grammar is learning the alphabet the first class of mathematics is learning the the numerals the numbers themselves what is the first lesson when you'd like to teach something somebody a little bit about financial literacy yeah for young people and for everyone the story has been the same whenever you want to have sound you know you know usage of your finances you want to have a prudent you know usage of your finances we've always proposed that you embrace the 50 30 20 rule whereby you're committing 50 percent of your income after tax into paying your needs and obligations and 30 percent of those funds you can commit them into paying your wants and you can be able to purchase whatever you need whatever is in fashion whatever electronic has come only 30 percent yeah and only the remaining 20 percent will go towards your savings and investments including payment of debts yeah so the 80 the 50 30 20 rule yeah could be the first step towards financial freedom it is and you know this rule was created by a lady author politician and investment guru called Elizabeth Warren she's a contender for the U.S. presidential elections and on a democratic party ticket Elizabeth Warren came up with this 50 30 20 rule in a book or all my wealth and it's and the book clearly says that 50 percent of whatever you get after taxes of your income after taxes should go towards payment of your needs and obligations 30 percent goes into your wants and 20 percent must go into savings or investments or payment of debts all right i'm interested in this 20 percent yeah this 20 percent that you're going to put aside this is your hard earned money and you don't want to play with it so what are some of the options we have as young people where do i put this 20 percent no matter how small yeah the 20 percent is so crucial actually when you look closely at that ratio you can easily say it's an 80 20 rule which has been broken down to 50 30 20 so 80 percent you can just do away with 80 percent you say i don't want to spend more money in my wants let me commit this 30 percent into my needs and obligations considering maybe you have more needs you have more obligations and responsibilities so the remaining 20 is so vital so crucial but so little as well but so important in the sense that it goes towards payment of your debts it goes towards your savings or investments and again that one gives us another question what is the difference between savings and investments when one saves you're simply putting money for future use for any day yeah you're putting your money aside for future use but now for investments you're putting your money aside for productive use therefore we again as investment advisors we encourage people to invest rather than rather than save all right when you talk when you talk investment we're assuming capital is required and uh at least we need to save some money to achieve or to raise that capital or can you just start investing with the 20 percent immediately you start earning your salary exactly the sooner the better you know barry will always say that you can invest in any vehicle that suits your pocket because investment is again function to disposable income you can't invest what you don't have therefore it's you it's up to you as an investor or as a prospective investor to kindly look across all markets we have in Kenya and say where can I invest instead of letting my money sit idly in a bank account can I invest it in the money markets can I invest my income in my 20 income in the stock market can I invest it in fixed income and that will now will bring us down to the different type of investment vehicles we have in Kenya all right and who are they meant for all right we're going to be talking about the vehicles the investment vehicles but before we talk about investment vehicles there's this thing uh that is a curse to our youth right now and it it's called debt yeah it has led to suicides in this country if you could and uh i'm told debt could be good debt could be the worst thing that you ever get into could be bad all right so uh i'd like to get to the good side of debt how can we use debt as a good thing that is a good thing and at the same time that can be a bad thing uh when you look at long time affordable debt that is good it's encouraged to take long term affordable debt so when you see long term debt the debt you're paying for two years three years four years five years and so forth it's good because the rate of return is low the interest rate of return is low however when you look at short top debt the debt you pay mobile apps mobile apps shy locks when you pay a debt within a period of two weeks one month two months that's dangerous interest isn't it and normally the interest rate is so high to an extent that is not sustainable all right and therefore we discourage our young viewers and we discourage our young audience young people who are crazing for these mobile lending apps to go down to slow down actually to stop this mobile lending because it's so dangerous because it's so expensive some of them are lending up to 20 per cent per month which is not sustainable number two because of the easy the availability of that loan it's so easy for you to get that loan at any particular moment as long as you've paid one they give you an offer you know the increase your limits so it becomes dangerous and it puts the young people in what you call a borrowing psycho risk so immediately after you're done with this one you're going for the next one immediately after you're done with the next one you go for another one so at the end of the year you found you find out that you've been borrowing all year long at 20 per cent per month which is not sustainable it's very hard to wake up in the morning and every headline on the newspaper is the president signs for another debt or the deputy president travel to sort for a debt to finish such and such a project so every headline in the newspaper is the government borrowing it's very hard to go back and not borrow as a person when your leader is constantly borrowing so what do you have to say about this you cannot use government as a yardstick into your personal behavior when it comes to matters of finance you know governments have unlimited sources of revenue to pay their debts including yourself not including the citizens yeah remember yeah because we pay taxes and government you know is at a position to collect as much as possible from us through taxes government has other ways of getting grants from multilateral and even other bilateral relations especially from other developed countries governments have different ways of raising capital through it be it through government securities those are treasury bills and treasury bonds where government has an opportunity to borrow domestically so it's not fair for an individual and in that matter a young person to compare himself to the government because government has multiple ways has multi channels of collecting revenue that can go a long way into paying the debts not to mention other productive resources not forgetting these loans are long term yeah not to mention that all these money government is borrowing is going towards infrastructure development those developments themselves can be able to self-sustain and pay most of these debts all right wonderful so what i'm getting from you is if you are going to get into debt it better be long term it better be for an investment exactly all right let's get back to the options that we have for investing because i'm guessing most of our youth and let's say an average of 30 000 for somebody we just graduated or even less or even less but my friends who recently graduated they tell me the the starting salaries are always somewhere around 30 000 pre-tax that is yeah so this is somebody who's 20 20 percent is it's going to be very little after tax yeah i remember my first job i was earning 9 000 9 000 that is a graduate from the job that i already was a graduate yeah all right so what you normally encourage these young graduates some of them are jobless let's speak for those who are jobless as well some of them are earning so little but there are many ways in which you can invest and the best investment vehicle for a young person a millennial somebody with small income or low income or not even steady income these month he has an income next month he has no income the best investment vehicle has always been the money market fund and the advantage of investing in the money market fund is that it gives you an opportunity to invest as low as possible for example the site all money market fund takes up to 100 shillings minimum you know starting investment amount so you can even start with 100 bob and start making you know commit yourself to making regular be it regular or regular top ups so that at the end of the year you find yourself that you've disciplined yourself for next thing that you have something substantial invested at a very competitive rate all right so instead of you keeping your money in an M-Pesa account i'm not saying M-Pesa is bad or any mobile money for that matter sitting your money in a bank account or a circle account instead invest this money in a money market account if you're not going to spend it if you're not planning to spend so that this money can be able to come handy whenever you have a rainy day because remember money market funds are liquid investment and what you mean by liquid investment we mean this money can easily be redeemable through withdrawing even using your phone all right and you can be able to make subsequent top ups so you can be able to withdraw the whole amount including the interest and the principle you can still go back even if you draw everything doesn't mean that the account is closed you can still go back make top ups you can still be able to make other top ups so it's more liquid investment but at the same time it gives you the benefits of a pooled investment because all the money is going to sit in one bank account and then it's going to be reinvested later by the assets of the investment manager all right how long back does this money market date is it is it a is it a fairly young thing or it's not money market fund and remember for example for the case study of the u.s money market funds began way back in 1970s so those are many years back those are many years those are many years back so however it's only that now the preference of money market funds as short-term low risk and liquid investments is rising in Kenya right now it's now that Kenyans are coming to the realization especially the young people who are always on social media they're coming to a realization that they can be able to invest their money in money market funds and be able to reap the best the highest possible benefits in terms of return and also enjoy the liquidity of withdrawing and topping up whenever they want all right we have young people that are blessed to have parents who accumulated some wealth so they might be having some assets that they don't want to lose because they probably have some ties to the assets this could be land this could be a building that was left by the parent or this could be a shop somewhere or so what are some of the the the best options for such a person with the least risk uh first of all for someone who's keen to invest into real estate we've always say that there are many options in which you can invest in real estate the first one is you can be able to buy and later sell that is you buy a property and then you sell later therefore you've participated in real estate through making you know a focus of targeting to earn from the capital appreciation of the property that you bought at a lower rate or at a lower price and then the capital you know the property has appreciated with time in terms of capital appreciation and therefore you can resell it you can buy property and put up that property for rent therefore you're earning what you call rental yield and a site on your keen on developing in places which have a highest you know rental yield therefore for a young person who's keen to invest in real estate you can be able to buy property and later resell after the property has appreciated or you've increased the value of the property by renovating and refurbishing number two you can be able to buy property and now start you know making a return of earning your money back through what you call rental income therefore getting the best rental yield assuming the property is in the best location and number three if you don't feel like you have the muscle of committing into real estate by buying or building brick and mortar you can as well invest what you call the project notes or real estate notes what you mean by real estate real estate note is simply investing in some development somewhere which is being developed by an investment manager for example Saiton and then by you investing money into this development the developer will be able to give you your return remember the developer is making some return through maybe the property sales so as he enjoys his return he'll be able to give you something as a proportionate to your contribution into your investment so that is what you call a real estate note yeah a real estate note all right thank you very much i'll hold you that for a bit remember we own facebook at white if i find we have a question right there the question is if you had a chance to invest what which field would you invest in and why we'll be sampling your feedback towards the end of the show right about now i have mr michael from Saiton Investments and is here to share with us some tips on financial literacy so uh yes as we move on there's another thing called uh this pension yeah pension has always been scandalous in this country yeah and uh so many people have shared away from uh from it considering the bad name it has had over time what would you say about uh young people saving for old age uh saving for your old age is a must and the sooner the better because the earlier you start the more you love accumulated by the time you're going for retirement it's true all of us who go for retirement at one point we'll all at one point and the energy we have right now the energy you're exuding as youths right now won't be there therefore you won't be doing whatever you're doing right now so it means it's good for a young person to come to a realization that one day he won't be having the energy he won't be having all that uh you know muscle to be doing whatever he's doing currently to and a living so at this point uh it's evident and data has that old age comes with its own shares of challenges in terms of terminal illnesses in terms of loss of energy loss of loved ones loss of the weather was caring for you loss of finances and so forth therefore it's prudent for a young person uh to start saving for retirement as early as possible and government has been in the forefront in terms of coming up with the legislation in terms of policy that is going to guide on how one is going to save for retirement and the options are out there glaring and the pension providers are out there and uh us like satan investments we have a very strong pension scheme uh targeting young people who are keen to invest as low as possible towards their retirement towards their retirement remember the moment you start saving for your retirement you cannot be able to access these funds until you reach the uh the earliest age of return the earliest age of retirement which is 50 years all right i will take you back to the 20 percent we were talking about the 80 20 room yeah so 20 percent uh i'm thinking of a middle-class canyon yeah 20 percent uh for investment for retirement for paying the debts uh inherited debts and your own debt as well i'm thinking this 20 percent uh is there a way one can come up with a plan uh say uh yearly plan or five-year plan or a 10-year plan uh to to diversify this kind of saving because i'm thinking 20 percent is not going to be enough to take a portion for for investing pension and and paying for that that's a good question barry and uh what you normally say actually the ratio is 50 30 20 however the 30 is for once whereas 50 is for the needs and obligations now the remaining 20 is what you're putting aside to pay debt and also commit city to into into investments now because you have 30 percent for once they're not things you necessarily need the things you don't necessarily need therefore it's up to you it's at you know actually disposal to think how can i catch down on my once so that i can as well supplement so it's all about sacrifice without sacrifices finances yeah exactly so it's about sacrifice so you can say let me sacrifice my once and instead compliment my you know my savings and investments and also compliment my needs and obligations so it's up to you know it's up to you to see how what amount are you going to sacrifice in terms of your wants so that at least you can be able to compliment all right you know your needs and also your savings in terms of investments all right another this one is a is a personal question i'm sorry for putting you on the spot do you go for holidays yourself yeah i should you do go for it is do you save for the holidays currently i'm saving for my Easter holidays you're saving for your Easter holidays all right so i'd like to know out of all these things what is the importance of just having some time for yourself just organize some small holiday for yourself as you work hard towards your financial goals what is the importance of that part of life it is very important but you see again the Kenyan youth have been able to you know exaggerate these you know these point these whole point of you know you know being there for yourself and trying to enjoy a little into making it monthly or even weekly affairs whereby someone can on Friday someone straight walks out of the office and straight goes into a bar to spend and saying oh the day the week has been long only for him to realize now is eating into the 50 percent and is eating also into the into the 20 percent so it's up to your personal discipline as well it's good for you to remain disciplined and say whereas yeah it's good for me to go for you know vacation it's good for me to go for a small holiday and you know have a good rest but remember you still have to commit 50 percent into being obligations and needs you still have to commit 30 percent into your wants and you still have to commit 20 percent or even more into your investments or even more impossible investment investment investment is a part of the day yes so remember we have a question on our facebook if you had a chance which field would you prefer investing in and why tell us on our facebook will be sampling your feedback towards the end of the show and we like that part for sure all right so i'd like to to get to know since you have experience in this world what are some of the the places apart from apart from this money market that Kenyan youth can invest in okay we also have uh because we're talking youth you're talking to young people young people people who are not accumulated wealth yet yeah therefore like i said is still the prerogative of this young person to sit or to sit down and think about where to invest the money to seek investment advisory and siton investment comes in handy when it comes to seeking investment advisory and we you know we advise the kenyan youth across board on different investment classes where they can be able to commit their funds ranging from money markets whereby they can start as small with as low as 100 kenyan shillings and keep on making top ups through their mobile phone they are into growing their portfolio number two they can still be able to invest in government securities we're talking about uh investing in treasury bills and treasury bonds you see the other day the central bank of kenya came up with a platform uh that is going to help retail investors young investors who are not able to invest a lot of money into the treasury bills and bonds they can be able to invest uh you know in the treasury bills and bonds with amounts below 140 000 into these platforms using their mobile phones therefore that's another good sign and kenyan youth need to be aware about these new developments especially when it comes to purchasing government securities and treasury bills and bonds because at the end of the day there's a perception that governments don't default and it's advisable for you to invest in government securities if you feel like money markets are not enough you can be able to invest into this platform direct and other than that you also have other fixed income ventures whereby you can still be able to commit your money at a longer period of time still be able to get a good return which is you know which is guaranteed and you're talking about things like fixed deposits you know fixed income products being offered by you know fund managers like site on investments you're looking at you know other opportunities in pension as well yeah all right wonderful so uh we have been talking about somebody who is at least earning some money who's able to set aside money to save and invest on the flip side we have somebody with an idea without cash whatsoever what are some of the options this person has to get investors to invest in their ideas now we're talking about somebody who has a good idea but he has a capital shortage or he has no access to finance so what you normally advise our youth is that to create a good credit worthiness it's good you create a good credit book so by you creating a good credit book it means you can work into any banking hall and be able to ask for a loan and through this SME loan you can be able to finance your business operations and then this will lead into profitability so it's good for a young person to know the importance of having a good credit record and remember the mobile app the mobile lending apps are not really helping in that side because they're making sure that they're going to list you you know in those credit and worthiness books and uh when you when you have that idea a good idea you're walking into a banking hall only for the relationship manager to tell you that your you know your credit books are not good a few coins you borrowed overnight and a few years back so it's good for the young people to know the importance of a good credit record therefore this will come in handy when you want that small loan to boost your small business idea so your credit record is very important it's very crucial investment beats saving any day yeah and what else did we learn today it's also good to take a break it's also good to take a break that is very important right there and thank you very much for coming i'll give you another chance to share with them your contact details just in case they need some financial advice thanks buddy your camera is number four yeah my name is michael obaga like i said and my phone number is zero seven two three 20 40 87 therefore you can be able to reach me on this line any time and be able to seek any financial advisory especially when it comes to matters investment all right thank you i'm looking forward to having you again i call this lesson one on our financial literacy thanks buddy all right yes you have come to the end of this particular segment and remember we are going to be something your feedback on facebook towards the end of the show and this is that towards the end of the show right there so keep them coming keep them coming my name is barry moses or it's barry mone social media we are going to have a short break then we'll be back with you guys