Financial literacy is an essential life skill that empowers you to make informed financial decisions. While it’s a skill you can learn at any age, the earlier you master it, the better.

At our recent training, we hosted CPA Philip Ogutu who gave an insightful presentation on financial literacy to graduates of St. Aloysius.

I’m excited to share the key points from his talk with you so that you can manage your finances better and flourish in other facets of your life. 

So, what is financial literacy?

Financial literacy is all about understanding basic financial skills and concepts. When you’re financially literate, you have the knowledge and confidence to make more rewarding decisions about your money.

This means you can:

• Responsibly manage your funds/income
• Make informed decisions on borrowing
• Allocate funds for savings
• Plan and invest for your future

Components of financial literacy

Philip highlighted five critical components of financial literacy that you should know:

Income:

Your income constitutes more than just your salary. It includes all the avenues through which you get money.  Know the amount you take home after taxes and other deductions like medical insurance and pension plans. Knowing the source of your cash; salaries, side-hustles, et cetera is key to managing your finances.

Spending:

Spending your money wisely helps you maintain proper financial health. To spend wisely, prioritise your needs over wants. This way, you know what you can spend on and in what order/priority.

“Make conscious spending decisions to avoid unnecessary debt,” Philip advises.

Everybody knows how to spend, but the right way to spend should involve drawing up a budget and following it.

A budget is a plan you write down to help you decide how to spend your money each month. And when you make it a habit, you will easily track your expenses to know where your money goes.

A budget doesn’t necessarily reduce your spending, but it will show you where your money goes so that in case you’re overspending, you know where to adjust. 

The 50/20/30 budget rule

Philip suggests the 50/20/30 budget rule, where 50% of your net income should go to needs, 20% to savings, and 30% to wants.

Understand the difference between needs (like food, education, and shelter) and wants (like entertainment and designer items). Tracking your spending helps you to live within your means. 

Save and invest:

Saving is one of the most essential ways to prepare for your financial future, and you should develop a saving habit early.

As a student, you can start with small investments and seek advice from financial professionals to build a diverse portfolio when the big money begins to pour in. 

Protect (Emergency Fund):

An emergency fund covers unexpected expenses, so you don’t fall into debt during unforeseen circumstances. Insurance is also a major component of protecting your finances, but it shouldn’t replace your emergency fund budget.

Always have an allocation for unforeseen expenses so that you don’t go back to your savings whenever a need you didn’t plan for arises. 

Borrow 

Kenyans are good at borrowing, which explains why mobile lending firms thrive here. However, if you must borrow, do so responsibly. Many people borrow money for the wrong reasons, and it costs them in the end.

Before you take a loan, understand the terms of any loan and ensure you can repay it without jeopardizing your financial stability. Avoid borrowing haphazardly because it can get your name into the wrong books with CRB, and limit your future borrowing chances. 

How can you earn an income as a student?

As a student, you can earn income through part-time jobs, freelancing, and internships. Part-time jobs fit your schedule and provide work experience. Freelancing lets you offer skills like tutoring, graphic design, or writing for a flexible income. Paid internships are great for income and enhance your resume and professional network.


Being in college requires money, and if you don’t have an alternative way to make money, you’re left to depend on your parents and the little loan you get from HELB. You can do so much as a student to earn, but consider your values, and engage in hustles that build you.

Students do quite a lot to stay afloat. Some buy and resell stuff, others earn commissions from selling other people’s products, while others sell their talents.

Find what works for you, but ensure you have a way to make a little money on the side while studying because you’ll need it. 

How can you spend wisely as a student?

Philip threw the question to the audience and they had wonderful suggestions on how they will be spending wisely in college. From cutting expenses to reducing party budgets, the audience shared wise spending ideas they will employ while in college.

After the suggestions from the audience, Philip shared how important it is to isolate needs from wants so that you spend only on what’s necessary. He also emphasized the need to budget, track expenses, and live with one’s means. 

How can you save and invest wisely as a student?

You can save and invest wisely as a student. Begin by opening a savings account and making regular deposits. This helps you build a habit of saving and provides a secure place for your money. Once you open a savings account, be intentional about saving; however little.

It’s more important to create and observe a saving habit.

On investments, start small and seek advice from financial professionals to help you build a diverse portfolio. 

Importance of financial literacy for you as a college student

Financial literacy is essential for college students today as they face financial burdens that previous generations didn’t like rising education costs and decreasing incomes. Thus, money management is a much-needed skill for survival in college and beyond.

Understanding basic financial skills and concepts prepares you for a successful financial future. Everything you do as an adult—earning money, budgeting, paying off debt, saving—relies on financial literacy.

Being financially literate makes it easier for you to live a more fulfilling life with the money you get. 

Conclusion

Financial literacy is essential for you. You don’t have to take a professional course to master it enough to manage your finances well. Start by downloading financial management apps and get in the habit of saving, investing, and managing your finances well.