The Differences between Shares and Savings.
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For anyone interested in savings and investments, shares and savings are not new terms. However, many people still do not know the difference between these two terms – especially newbies. This article is aimed at unpacking the two terms and help you make wise investment and savings decisions.
What are Shares?
To start with, when answering the question; what are shares? Shares are units of equity ownership interest in a corporation or SACCO that exists as a financial asset providing for an equal distribution in any residual profits, if any are declared, in the form of dividends. By purchasing shares, you become a shareholder in the financial institution through share equity. Additionally, shareholders may also at times enjoy capital gains if the value of the company rises.
Share capital is a unit of ownership in the Sacco that a member obtains to become a co-owner. It is also the member’s permanent contribution towards the Sacco capital which forms part of the Sacco equity.
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What are Sacco Savings?
Savings on the other hand refers to the amount one pays himself first by routinely and automatically putting it aside before one’s consumer spending – in a financial institution, a Sacco for example, it is the amount you deposit to your account every month.
When a member of a Sacco deposits money into their account, it is known as Saving. This money still belongs to the member and can be withdrawn per the guidelines of the Sacco at any given time.
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Differences
When a member of a Sacco deposits money into their account, it is known as Saving. This money still belongs to the member and can be withdrawn per the guidelines of the Sacco at any given time.
The amount saved by a member in a Sacco can also earn interest at the rate provided by the respective Sacco.
Saving has become an important aspect of our daily lives. As long as you have a source of income, there is always a need to save for different purpose like an emergency, future investment or simply for security purposes.
Before joining a Sacco, for example Mombo Sacco – Kenya’s premier mobile-only Savings and Credit Co-operative Society that offers back-office service activities, one has to buy shares as they serve as eligibility to borrow and to access to all other Sacco services. When joining Mombo Sacco, they require new members to purchase a minimum of 200 shares worth Ksh20, 000 in total. Here is a link to schedule of the share purchase based on savings plans.
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The shares purchased makes the member own a share capital to the SACCO which earns dividends annually when the firm declares. This one is according to the rates decided by the Sacco. Good to note is that in MOMBO, shares are not used to determine the amount one can borrow.
Dividends depend on the profits made by the Sacco, therefore, the more the shares the more the dividends.
In MOMBO Sacco, one can save conveniently from their phone and the savings can earn up to 6 percent interest per year. This rate is very competitive as compared to other Sacco’s and even top tier banks. Other Sacco’s combine interest and Dividends together hence the higher numbers they announce. Mombo Sacco is yet to announce dividends since members are focused on retaining all surplus to build shore up equity. To reach all Kenyans, the Sacco provides different saving plans which include; Bronze, Silver, Gold and Platinum. Plans in the Sacco are recommended to members depending on their needs.
A member’s savings in MOMBO is the major determinant used to determine the amount of money he or she can borrow. The Sacco allows one to borrow up to five times the amount of their savings in the Sacco.
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