It hurts, right? When a litre of petrol rises by 3 shillings, and you know that means you’ll have to pay an extra 10 or 20 shillings for your matatu fare. Or when bread, cooking oil, or sugar prices rise by a couple of shillings, and you’ll have to dig deeper into your pockets to have a meal. Keep reading, and I’ll reveal ways money is bleeding from your pockets, and you don’t even notice it.
In January 2024, Kenya’s annual inflation rate rose to 6.9%, up from 6.6% in December 2023. By November 2024, it had dropped to 2.8%. Several factors could impact these projections next year, so it’s important to stay cautious.
In Kenya, current accounts typically do not earn interest, as they are designed primarily for everyday transactions, offering easy access to funds for daily needs. However, there are some exceptions where banks may offer very low interest rates on current accounts or provide special arrangements for high-value accounts. These interest rates are generally lower compared to savings accounts or fixed deposits.
Savings accounts, on the other hand, are more likely to earn interest, with rates depending on the bank and account type. For example, savings accounts in Kenyan banks can offer interest rates ranging from 2% to 6%, but it varies widely based on the institution and account terms.
Suppose inflation rates were to rise to 6.9% in January 2025, as it did in January 2024. This means anything you purchase may be inflated by 6.9%. Your bank account gives you 0% on your current account and 6% on your savings account. By December 2025, your savings might have earned you a 6% interest, but the purchasing power of your money has decreased because inflation is 0.9% higher.
The same applies to those who choose to save their money in a merry-go-round chama. The purchasing power of your money has decreased by 6.9% in December, you just don’t see it because it’s not as obvious as seeing fuel prices rise by 3 bob.
The Big Question: Is Your Savings Strategy Beating Inflation?
To truly build wealth, you need to ensure your savings or investments outpace inflation. Simply stashing cash in a chama or low-interest savings account may feel safe, but it isn’t protecting your purchasing power in the long run.
This is where money market funds in Kenya come into play. These funds offer not just safety but also competitive returns that can help you grow your wealth while staying ahead of inflation.
If I were choosing a saving platform, I’d ask myself, are the interest rates they are offering beating the annual inflation rates? You need to get compensated for inflation if you are going to build your wealth over time.
Here’s my favourite part. Money market fund offer an average of 13-14.38% interest per annum on the money you invest with them. You kill two birds with one stone because you are saving and investing at the same time. You can start investing with as low as 100 sh. This option is available with Zimele Money Market Fund. But my all-time favourite is Jubilee Money Market Fund, which offers a whopping 15% p.a. with as low as 5000 sh initial investment and 1000 sh minimum monthly top-ups.
Remember, you can’t save your way to wealth. You need to invest.
Why Investing Beats Saving
Here’s the reality: you can’t save your way to wealth. While saving is essential for creating a financial safety net, investing is the key to long-term growth. Money market funds offer an accessible entry point for those looking to transition from saving to investing.
Their combination of safety, liquidity, and high returns makes them a compelling choice for anyone looking to outpace inflation and grow their wealth over time.
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