Even though I am proudly African, I hate the concept when my friends or colleagues excuse their lateness with such stereotypical comments like ‘there is no hurry in Africa,’ or ‘African time.’  Time is not just important in the workplace or in your own personal schedule, but is also the single most fact that decides how you can accumulate wealth.

Why is such a simple thing as a ticking clock an important element in your decision? Time allows you the opportunity to postpone consumption and earn interest. The time value of money explains that money received in the future has lesser value than money received today. Meaning one thousand francs today can buy two sodas at five hundred francs each but in ten years when the price of soda is one thousand each, the same amount can only buy one soda.

So even if you save one thousand francs every month for  five years and keep in under the mattress, you will end up with sixty thousand francs which is a nice sum, but by that time that amount will be less valuable than if you used it today.

So as much as saving is a good habit, it is more important to learn how to make sure your money gets a life of its own and grows to make you more money. Benjamin Franklin made it clear that ‘Money makes money. And the money that money makes more money.’

For example if you want to buy a house which costs Rfw 10,000,000 and you do not have the full amount today, you can either save money for ten years or get a loan which you will repay in ten years. If you save Rwf 1,000,000 a year, you will have the full amount in ten years, but then the price of the same house might be Rwf 20,000,000 so you would fail to buy that house.

On the other hand you can borrow Rwf 10,000,000 and repay it in ten years at an annual interest rate of 10%, you will pay Rwf 132,150 every month to total up to Rwf 15,858,088 in ten years.

On the other hand you can decide to pay Rwf 100,000 monthly rent and in ten years you will have paid Rwf 12,000,000 to the landlord and still be a tenant. Every person has his own unique needs and he/she needs to look at all financial options and decide the most workable way of using the time value of his/her money. That should apply when saving, investing, borrowing, or spending.

Ends