Navigating the economic landscape has been extremely challenging for many Basotho, especially those with loans. The frequent interest rate hikes over the last few months have led to increases in monthly loan instalments, putting further strain on household wallets. Fortunately, for Basotho with savings, the interest rate increases have provided some positive returns.
To wrap up the Leruo Savings Series that began on 7 July 2023 to commemorate and promote a culture of saving, this week’s article discusses why as Basotho we should start saving and take advantage of the good interest rates.
This week, the Central Bank of Lesotho’s (CBL) Monetary Policy Committee (MPC) announced at its meeting held in Maseru on Wednesday, 25 July 2023 that it has decided to keep the CBL rate unchanged at 7.75% per annum. This is good news for Basotho and reason enough for us to take advantage and start saving.
How does the CBL Rate impact savings accounts?
The CBL rate is the base interest rate in the country and influences the prime lending rate. An increase in the CBL rate leads to a higher prime lending rate. For people who have loans, a higher prime lending rate impacts their loan instalments, for more details on this, please refer to the [1]article titled ‘How does interest rate hike affect your festive budget?’ available on The Reporter’s website. For people with savings accounts they earn much higher interest and receive many benefits.
What are the benefits of saving?
There are many benefits of saving which I discuss below. The list is, however, not exhaustive.
- Earn interest – When interest rates are high; savers earn a better interest on their savings.
- Financial security – Should things go wrong for example loss of income; savings provide a safety net or cushion.
- Avoid taking unnecessary debt – Not all debt is bad but when you have savings, you do not need to take unnecessary debt to take care of basic needs.
- Financial discipline – When you have the discipline to save, it becomes easier to nurture the habits and discipline to start investing.
Where can Basotho start saving?
Firstly, it is important that we understand the difference between saving and investing. Saving is usually short-term, with the intent to use the money for emergency funds, travel plans, paying school fees as discussed in the article titled [2]‘Why You Should Prioritise Saving and Investments’ available on The Reporter’s website.
Depending on the saving goal, you can start saving with licensed banks, asset management companies, mobile money providers and mekhatlo. In the article titled ‘[3]Take Care of Your Savings and Start Saving’ also available on The Reporter’s website I discussed options such as treasury bills, money market unit trusts, traditional savings accounts, fixed deposits, notice accounts and mekhatlo that are available in Lesotho.
For more information, speak to your financial advisor or follow Leruo for more personal finance tips available at www.alliance.co.ls
Mahlohonolo a selemo se secha Basotho, here’s to building Leruo! Likhomo!
[1] How does the interest rate hike affect your festive budget? https://www.thereporter.co.ls/2022/12/15/how-does-the-interest-rate-hike-affect-your-festive-budget/
[2] Why You Should Prioritise Saving and Investments’ available at https://www.thereporter.co.ls/2023/07/20/why-you-should-prioritise-savings-and-investments/
[3] Take Care of Your savings and Start Saving’ https://www.thereporter.co.ls/2021/03/29/take-care-of-yourself-and-start-saving/
