When done correctly, budgeting can transform one’s finances by allocating resources wisely, reducing the likelihood of impulse spending.
By Michael Akuchie
According to research by data-gathering and visualisation company, Statista, Africa has the youngest population in the world. The research further states that around 40% of the population was aged 15 or younger as of 2023. The fact that Africa has a largely youthful population is promising, especially in terms of potential economic development
It is a well-established fact that the youth of any country play a significant role in determining its growth. An article by the United Nations supports this assertion, adding that Africa’s potential for success with its young demographic depends heavily on whether they are provided with the right opportunities, such as quality education and employment.
One way young Africans can position themselves as future contributors to their countries’ development is by demonstrating strong management skills. And what better way to showcase this ability than by managing their finances efficiently? For young Africans who work and earn on the continent, budgeting is a concept many are familiar with. Investopedia defines budgeting as the “act of putting together a budget, which is an estimate of your revenue and expected expenses for a given time period.”
Consider the case of a twenty-five-year-old customer support staff member at a travel agency who earns N150,000 monthly. Rather than spending most of their salary on fleeting desires, like a pair of sneakers spotted on Instagram, they choose to allocate their income to various categories, such as wants, needs, and savings, using a budgeting app.
When done correctly, budgeting can transform one’s finances by allocating resources wisely, reducing the likelihood of impulse spending. Fortunately, there’s no longer a need for pen and paper to organise expenses, as many budgeting apps have emerged in recent years, allowing users to automate the process and monitor their finances in real time.
Budgeting is a welcome trend in the life of the average young African, bringing them closer to achieving their financial goals. It also builds financial literacy among young people, thereby increasing their chances of making smart decisions that impact their finances.
For instance, a financially literate person faced with a choice between a need (such as an electricity bill) and a want (like a ticket to the latest blockbuster movie) would naturally prioritise paying the bill before considering the movie ticket.
Budgeting also helps young Africans build better savings habits. It is worth noting that budgeting and savings are closely related concepts, both of which are essential for strengthening one’s chances of financial stability. A well-designed budget should include a consistent allocation to savings.
Whether intended for a long-term purchase, such as a car, or an emergency fund that can be accessed when needed, cultivating a strong savings mindset is crucial, and budgeting can help develop such an attitude.
In today’s world, where everything—from bill payments to movie streaming and bank transfers—can be done on the go using mobile applications, it is no surprise that you can kickstart your budgeting journey by downloading a mobile app.
Unlike the manual method, where you are responsible for tracking each expense, these apps are designed to automate the entire process, eliminating the hassle often associated with creating a budget on your own.
Some of the most popular budgeting apps available for young Africans to download include YNAB (You Need a Budget), GoodBudget, M-Pesa, Expensify, and Spendee. Each app offers unique features, so it is important for prospective users to carefully compare them before making a final decision.
When considering a budgeting app, be sure to evaluate its user interface, as it is typically the first thing you will encounter. If it is well-designed and easy to navigate, it is likely worth using. You should also consider its expense tracking feature and whether it includes bank account integration, which will make it easier to move money in and out.
As mentioned, budgeting apps streamline the process, making it more convenient to track your expenses and income. You can also monitor your finances in real time, wherever you are, as long as there is an active internet connection. Through quarterly or yearly reports released by the apps, you can enhance your financial knowledge.
Although budgeting apps are considered helpful for young Africans, a few challenges need to be highlighted. Despite the potential for widespread economic growth, Africa still has one of the lowest internet penetration rates.
This means that a large percentage of the continent’s population lacks internet access. Whether due to government-sanctioned internet restrictions or the unavailability of telecom masts, internet access in Africa, particularly in rural areas, is still not widespread.
Another source of concern is the privacy of these budgeting apps. With cybercrime constantly evolving to outpace the best cybersecurity practices, there is a high risk that users could fall victim to phishing scams, potentially leading to the unauthorised withdrawal of their funds. Successful phishing attempts not only rob people of their money but also contribute to a growing distrust of fintechs.
Not many people are aware of budgeting apps and their potential benefits. If you do not have significant knowledge about budgeting, there is little chance you will decide to download an app that helps manage it for you.
As such, it is up to fintechs offering budgeting services to explore ways of promoting the importance of budgeting and why the public should seriously consider using an app. Doing so not only increases the likelihood of new registrations but also enhances financial literacy for those reached by the advertising campaigns.
Budgeting can transform one’s finances, setting them up for economic empowerment even in regions facing inflation. The young population in Africa is literally and figuratively the future of the continent, and a great way for them to cultivate valuable management and decision-making skills is by budgeting their income.
Admittedly, more needs to be done to raise awareness of budgeting, especially in rural areas. Budgeting apps also need to strengthen their cybersecurity practices to discourage hacking attempts. Users must be continuously educated on phishing and other social engineering tricks to stay protected. By carefully allocating money to various aspects of their lives, young Africans are establishing a financially stable legacy for themselves and future generations.
Michael Akuchie is a tech journalist with five years of experience covering cybersecurity, AI, automotive trends, and startups. He reads human-angle stories in his spare time. He’s on X (fka Twitter) as @Michael_Akuchie & michael_akuchie on Instagram.
Cover photo credit: Fortune