MAKE THE MOST OF YOUR WEALTH ACCUMULATION PHASE

Story By PATRICK WAMEYO, Daily Nation, Money Columnist

In “Business is the largest source of cash for investment” we concluded that young people looking for financial freedom must consider investing during the “accumulation phase” in their lifetime because it offers the most returns for every shilling.

We are all born babies, and roughly go through four career phases namely — school and college (navigation) stage that ends in the early-twenties, career establishment period that starts in the early twenties to mid-thirties (age 35), the mid-later career phase that starts at around age 35 and ends after age 60.

Career establishment phase which starts at about 22 years in Kenya, also sets in the wealth accumulation period in financial planning. While this career phase begins at the first employment or engagement in other money making activities, it gives way to mid-career phase at around age 35. Wealth accumulation phase starts concurrently but stretches to the age 45 of years, before giving way to wealth consolidation phase in late 40s.

Children of both the wealthy and poor go through these intertwined phases in life together, the difference, however, emerges from what they do with their time and money.

Children who were socialised in wealthy ways graduate into young adults who are naturally money-savvy — they save and borrow to invest from the first pay slip. Their counterparts brought up in poor ways have to first catch up with a life of goodies for many years until they get a rude awakening from growing bills as their purchasing power shrinks since they have been living in a series of financial mistakes.

By this time, they have lost approximately 15 years of their career — earning money from salary only, focusing on expanding it as their spending and family size grows. Regrettably, they have also lost the most valuable investment time frame in their life.

If you take a look at your classmates, you will notice that most of them were born and socialised in poor families. Does it appear normal that everybody else seems to borrow money to buy consumer goods like cars when they do not have investments?

For such people, investment actions taken after wealth accumulation phase, may not be adequate to produce as much returns both in quantities and timespan to meet the needs of the ageing adult during his/her late career, principally because of investing inexperience, and besides, other priorities demanding their money.

— Patrick Wameyo is a financial literacy educator and coach. Email: coach@financialacademy.co.ke