FINANCIAL LITERACY- INTERMEDIATE COURSE

We all make a great many “money decisions” over the course of our lives. We will make decisions about earning money, spending, saving, borrowing, investing and donating. The first challenge, before making decisions about how to use money is, of course, to find ways to earn money.

Most of us will earn income by working for others- a company, a government, NGOs, and so on. Through education, training and experience, people aim to develop a particular talent or skill while, at the same time, developing “employ ability skills” and “enterprising skills”.

An entrepreneur is someone who, in order to accomplish his/her goals, set up and operates a venture. In many cases, this means starting a business. There are many Kenyans who have set up and run their own business.

n addition to a share of profits that you can earn from investing in a company (paid as dividends), you can also earn an income in other way. If a company’s shares are publicly traded, you can buy shares on the “stock exchange.” An owner of shares (“stock”) of a publicly traded company can sell their shares through a stock exchange- such as Nairobi stock exchange.

• What is an entrepreneur or an enterprising person?
• Contributions of entrepreneurs

Entrepreneurship involves recognition of opportunities (needs, wants, and problems) and use of resources to pursue an idea for new, thoughtfully planned venture.

Once you have found an opportunity, it is important to assess it. Is it a good one? Is it a great one? Is it the best that can be found? To start out as an entrepreneur, the most important thing to have is a good opportunity.

Armed with a good opportunity, you also a good idea. Most entrepreneurs start with finding a good opportunity. Then they look to develop a good idea.

Once you have an idea, or a bunch of ideas, you have to evaluate or assess them- just as you would evaluate an opportunity.

Most Kenyans will have to borrow money at some point in their lives. It may be using a credit card to borrow money for a short time (hopefully a short period!). It may be a mortgage for a house that may take 25 years to repay. Borrowing money, and using debt, does not have to be a bad thing.

Today, in general, more people are borrowing money than people did 10 or 20 years ago. Why is that?

One reason people borrow more money today is that, by and large, incomes are higher than they used to be. With higher incomes, people can often afford to carry more debt. For example, if you earn an income of kes 500,000 a year and want to borrow kes 200,000 for three years,

• Unexpected expenditure: Maybe your car has broken down- or your child got sick. It is important to try and save to be prepared for these unpleasant surprises. But, if they happen, you don’t have the funds available, borrowing money may be an option.

• Credit cards: An institution, such as a bank, may decide to provide you with a credit card. This card usually have a “credit limit.” This will be maximum amount they are willing to lend you. You can then use the card to charge purchases up to that limit.

The cost of credit is the amount of interest that is paid on the loan. But the total you will pay on a loan will determined by more than the rate of interest.

The total cost will also be affected by how long it takes you to pay back a loan. The longer it takes you to pay back money you borrow, the more you will pay in interest.

So, lets summarize some of the key points we have covered about borrowing money:

• Know the total cost you will pay for any loan you take on- principal + interest costs.
• Pay off credit cards each month. Don’t carry debts on credit cards. If you can’t pay off what you owe on a credit card, and you have been carrying a growing balance on your card, consider taking out a regular loan to pay off the credit card balance. You will pay a lot less in interest on a regular loan than you will on a credit card.