Why do we spend money as we do?

Successful athletes dying poor highlights need for financial literacy

In Summary

• From squandering fortunes to accumulating 'dead capital', we have a lot to learn

A man salivates at his fortune
A man salivates at his fortune

You've had a financial breakthrough. It could be anything from getting your first job to winning some prize money to getting a substantial amount of cash after selling an asset.

What's the right way to spend the money? Build a house or put the money in an interest-earning bank account? Buy land or pursue higher education? Build your parents a house or buy a car for yourself? Get married or help raise your younger siblings?

As most Kenyans working in urban areas regard themselves as temporary immigrants, men are typically expected to secure a piece of land in the rural areas and build a house there. The rural home is used whenever the family goes to visit during the holidays. It is also expected to be a retirement home.

Emerging trends show a rising number of urbanites choosing to remain in towns after retiring from formal employment. This trend is giving rise to questions over whether rural homes built by urban Kenyans are tying up valuable cash that could have been put into productive investments.


Former Permanent Secretary Prof Bitange Ndemo controversially introduced the term 'dead capital' in reference to under-utilised rural homes.

"I am not against people spending their money in whatever way they choose. It is their choice after all," Ndemo wrote in the Daily Nation.

"But there is a need for a mindset change because we have invested more than Sh50 billion in non-productive assets, thereby setting ourselves on a destructive path."

One of the biggest fears among Kenyan communities is for an adult to die without a rural home. Questions arise, such as, "Why didn't the deceased build a home despite making money?”

Bitange's critics pointed out that a cash value cannot be placed on everything in society. A rural home, they argue, provides peace of mind and a connection to ancestral land.

Financial experts say the decisions we make in terms of what to do with money are strongly determined by the habits, norms and values we learnt in our formative years.

The availability of money is not the only factor that influences the spending decisions of adults. Research shows that spouses and children (if present) are major influences on spending decisions.

Gender responsibilities come into play, too. According to an article in the Journal of Financial Counselling and Planning, women engage more in day-to-day money management of the homestead, whereas men are more engaged in long-term decisions, such as investment.

"These findings suggest that men and women may have and acquire different experiences and expertise in financial decisions," the authors noted.

Men often specialise in decisions that require more specific financial knowledge, such as investing and taxes, whereas women tend to lead bill-paying and short-term planning and spending.

All family members in the household, including the children, influence financial decisions. Older children who have started contributing to the household's income also gain influence on the family's financial decisions.

The ability to make prudent financial decisions comes down to what experts call "financial literacy", a state of mind where an individual has sufficient knowledge to earn money, save and invest it, budget for it and insure his or her assets. Indeed, an insurance policy can make the difference between staying wealthy or plunging into poverty in case a disaster such as illness, fire, theft, injury or death occurs.

A 2016 report on financial literacy in Kenya found that individuals who score high in financial literacy are likely to be financially successful. Higher financial literacy is associated with greater wealth accumulation, higher probability of investing in stock markets and a wide variety of investments.

Less financially literate households borrow at higher interest rates and are less likely to participate in formal financial systems. The findings are published in the International Journal of Business and Economics Research.


Is there a right way of spending money? Obviously, saving and investing should be a priority because, regardless of your current circumstances, there will always be a need for money in the future. It is also clear that cultural attitudes towards money have a strong bearing on the financial decisions we make. The friends we keep are a very important influence, too; they can lead to wise or unwise spending decisions.

The tragic death of world record marathoner Kelvin Kiptum highlighted the difficulties of living up to societal expectations. While many people questioned why the late Kiptum had not yet constructed a 'proper' home by the time of his death, others pointed out that his career was only just starting and that building a home was not a priority.

Kenya's athletes are famous for winning athletic events across the world. Apart from medals and trophies, the winners also get cash prizes, but there are concerns over the manner in which that wealth is managed.

A 2022 report by two researchers affiliated with Kenyatta University describes professional athletes as "blindly investing and squandering large sums that wind up yielding little or no return due to ill-advised information and money managers".

"Professional sportsmen and sportswomen must make informed personal investment decisions to protect their future from bankruptcy," James Mathuku and Farida Abdul concluded from their study.

A related survey done earlier on soccer players in the Kenya Premier League produced similarly worrying findings on money matters. The discouraging results were attributed to a lack of knowledge on managing personal finances.

It is due to this background that President William Ruto announced during Kelvin Kiptum's funeral that the government will collaborate with the sporting fraternity to educate athletes on financial management. Furthermore, the state's reward scheme for athletes will include a pension component to help retired athletes during their old age.

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