COSTLY MISTAKES KENYANS MAKE WITH MONEY MARKET FUNDS - And How to Fix Them

Today, let’s talk like friends. I’ll walk you through eight common mistakes we make with MMFs , and how to avoid them so your money actually works for you.

Let’s be honest. If you’re like most of us, you probably heard about money market funds (MMFs) from a friend, a cousin, or maybe on someone’s WhatsApp status. Ati “Hii fund iko na 14% returns per year, si uweke pesa hapo.” And just like that, you signed up. But did you really check the fine print?

Money market funds are amazing - they are safe, flexible, and can help you build financial discipline. But here’s the catch: not all MMFs are created equal. And many Kenyans (myself included at one point) have made costly mistakes that eat into returns without even realizing it.

1. Not Knowing Where Your MMF Invests Your Money

Most of us just trust the hype. “Ati this one gives 14%.” End of story. But the truth is, MMFs invest in different places: treasury bills, corporate debt, or bank deposits. And the percentages vary.

That’s why you need to normalize checking the fact sheet. Almost every MMF in Kenya publishes one on their website. It shows you a pie chart of exactly where your money is going. Imagine realizing that 70% of your MMF is in corporate debt and you didn’t know? That’s unnecessary risk you signed up for blindly.

Moral of the story: Don’t invest in vibes. Know where your money sleeps.

2. Focusing Only on Gross Rates

“Wueh! 14% per year? Si hiyo ni deal!” Not so fast, my friend.

Before you celebrate, remove management fees (sometimes 2–2.5%) and then remember taxes (15% withholding on the interest earned). Many people make the mistake of doing 14% – 15% tax. Wrong.

The right way: calculate your net return after fees, then remove 15% from the interest portion. Suddenly, your “14%” could be closer to 9.5–10% net.

It’s not about discouraging you - it’s about managing expectations. Don’t count money that will never enter your pocket.

3. Using MMFs for Long-Term Goals

Here’s one thing I always say: MMFs are for liquidity, not legacy.

If you want to build an emergency fund, save for school fees next term, or park money for a few months before buying land, MMFs are perfect. They’re liquid, safe, and flexible.

But if you’re planning for your child’s university fees 10 years from now or retirement, don’t lock that money in an MMF. You’ll miss out on compounding in higher-yield investments like bonds, stocks, or unit trusts.

Think of MMFs as your m-pesa ya savings - short-term, easy access, but not your retirement plan.

4. Not Automating Deposits

Here’s the painful truth: many of us are not consistent savers. We wait until “extra money” appears, then remember our MMF. But guess what? Extra money rarely comes

The trick? Automate.
Set a standing order to your MMF every month. Treat it like rent or a loan repayment. That way, you won’t start negotiating with yourself at the end of the month whether to save or not.

Discipline builds wealth. Automation makes discipline easy.

5. Treating MMFs Like M-Pesa

Another mistake is dipping in and out of MMFs like it’s your normal bank account. “Aki I need 5k for drinks, let me just withdraw.” Before you know it, you’ve eaten your emergency fund.

Every withdrawal interrupts the compounding magic. Remember, MMFs pay interest monthly, and that interest earns interest. If you keep disturbing the cycle, you’ll forever complain that “MMFs ni scam.”

📌 Pro Tip: Attach every MMF to a specific goal like emergency fund, travel, school fees. That way, you’ll respect it.

6. Picking the Wrong MMF for Your Needs

Not all MMFs are equal. Some allow you to withdraw within 24 hours, others take 2–3 days. Some have minimums as low as 100 bob, others require 2,500 or more.

Before you sign up, ask yourself:

• Do I need fast access to my money?
• What’s the minimum deposit?
• How good is their customer service or app?

Choose wisely. For example, I keep my “fun money” (like travel or birthday savings) in a fast-access MMF. But money I’m parking before buying a bond? I put it in one that takes longer to withdraw, just to avoid unnecessary temptation

7. Panicking Over Daily Fluctuations

MMF rates change daily - sometimes it’s 9%, tomorrow it’s 15%, next week 8%. Many people panic and start jumping ship to “the hottest MMF” they see trending on WhatsApp groups.

But that jumping is costing you compounding power. The rate that actually matters is the effective annual yield (the yearly average). Stop stressing over daily or weekly fluctuations.

Investing is like marriage - don’t keep hopping around. Commit, be patient, and watch your money grow.

8. Owning Too Many MMFs or Chasing Returns

Some of us sign up for three, four, even five MMFs, just chasing the highest rate. Not only is this exhausting, but it also exposes you to shady funds that promise unrealistic returns.

Here’s the truth: the difference between 10% and 11% interest won’t change your life if you’re not consistent with deposits. What will change your life is topping up every month and letting compounding do its thing.

Stick to one or two credible MMFs, stay consistent, and give it at least a year before making judgments.

The Bottom Line

Money market funds are one of the best financial tools available to Kenyans today. They are simple, flexible, and safer than most alternatives. But they work best when used the right way.

So, don’t just invest on vibes. Check where your money is going, manage your expectations, automate deposits, and most importantly - stay consistent.

At the end of the day, it’s not the daily fluctuations or the marketing hype that will grow your wealth. It’s the discipline of saving regularly, avoiding unnecessary withdrawals, and letting compound interest work quietly in the background

As Albert Einstein famously said: "Compound interest is the eighth wonder of the world." Usikose hiyo wonder.

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