THE ACT OF SAVINGS – KEY TO BUILDING CAPITAL

On CNN African start-up programme (Tuesday edition in the morning(GMT) of 22/09/2015) interview with tony Elumelu.

He stated that the best advice he had received is that if you can’t save when you earn a dollar, you can’t save if you earn a billion dollars, thus savings is key to building capital for your business.

What is Savings?

Savings is a personal act of keeping part or whole of income, revenues, profits, precious minerals etc. personally or with a financial firm for future use.

.What is Capital?

Capital in business world is the amount or input (Any other Asset) a business owner put into a business at the beginning or later. In Accounting the owner is separate from the business, thus the money the owner put into the business is treated as a loan (credit) to the business and captioned as capital. The capital of the business remains the same until additions are made to it by the owner or new partner/investor.

Capital injection is mostly for business expansion. It is used to buy equipment, build or buy landed property or other assets that brings about growth and expansion. It is in some few cases that capital is used to pay recurrent expenditures.

Types of savings

  • Saving with the banks
  • Saving personally at home or work place
  • Savings in Gold, Paintings and the likes
  • Investing in Stocks
  • Investing in the Money Market (Securities)
  • Investing in Insurance Policies
  • Etc.

Benefits of Savings

  • Savings at financial institution maintains the value of your money due to interest received
  • Enable you to be disciplined. if you are disciplined with your  money you can be disciplined in many areas
  • Make you rich by the day as you save
  • Enables you to absorb shocks of life (emergencies)
  • Gives you peace of mind
  • Prepare yourselves to take-up opportunities that comes by days

Dangers of not saving

  • You become venerable to unexpected circumstances
  • Risk losing opportunities - you may not have money to grasp opportunities when they come by

In today’s world, it is difficult to come about cheap capital especially if you are about to start business. Most successful business entrepreneurs saved and started something small with their own capital and later sought for additional capital injection. By then they had gained confidence from financial institutions they save with. Banks can look at their daily or periodic deposits and redraws over a period and determine the amount of loan they can offer them. It is therefore advisable to deposit your daily sales in the bank and always spend from the bank and not sales.