“Where is the best place for me to save my hard-earned money? Is it in a Sacco, bank, or money market fund?” This question plagues many young Kenyans, especially those new to the workforce or entrepreneurship.

With options like Treasury bills, bonds, and conflicting financial advice on social media, Bizna Kenya consulted personal finance expert Margaret Njeri for clarity.

Below are her insights on selecting the ideal savings platform.

There are three key factors you need to consider while choosing a savings account: either a money market fund, a Sacco, or even a bank. So you need to consider three key factors. And factor number one, you need to check on your financial goals.

Are they short-term, something that you want to achieve within one year? Are they medium-term? Are they long-term, something that you want to achieve between one to five years? Are they long-term, something that you want to achieve either from above five years?

“So you need to check on those three goals, that is, either short-term, medium-term, or even long-term,” Njeri started off.

The second factor to weigh is liquidity.

“How easily do you want to access these funds, either from a Sacco, from a money market, or even from a bank?” Njeri asks.

The third and final factor is risk tolerance.

We have two types of risks. We have high and low risks. And these three accounts—these three savings accounts, each and every account has its kind of risk factor, either high risk or even low risk. So you need to know: How much can I be able to lose? And how much can I be able to risk?

With these considerations in mind, Njeri dives into the advantages and disadvantages of each option.

Advantages and disadvantages of saving in a bank

According to Njeri, saving in a bank offers three key advantages. “We have advantage number one. We have liquidity factor, whereby you can access funds from a bank very easily, either using your ATM card or even through mobile banking.”

She also emphasises the security banks offer.

“In Kenya, we have CBK. This is a kind of scheme that is managed by the Kenya Deposit Insurance Corporation. And it ensures that your deposits or even your savings are safe in a bank. And you need to know how much I am guaranteed from a bank in the event of a bank collapse. Know that the maximum insured limit is Ksh 500,000. So even if there is this security factor, you need to know up to how much I can be refunded if my bank collapses.”

The third advantage is convenience.

“Saving in a bank is more convenient because you can actually save it either daily, or even deposit towards either your short-term savings goal, either for your emergencies; you can use a bank to do that,” she notes.

However, there are also clear disadvantages.

Banks do not have high interest rates when it comes to deposits. Even the low returns that you’re getting depend on the account that you have opened with that bank. Is it just a traditional bank account that does not give you any return, but if it’s a fixed deposit saving account you can get a low return of about maybe four percent on a higher side six percent.

She also points out hidden costs.

“When you save in a bank and you normally notice that there are withdrawal charges and of course, there are management fees that you need to pay to your bank to save your funds. So there are those disadvantages of incurring extra charges either through withdrawing or even management fees.”

Advantages and disadvantages of saving in a Sacco

Njeri highlights that a Sacco, or a savings and credit cooperative organisation, offers high returns. When you save in a Sacco, as compared to a bank, they have higher interest rates, comparing the two. So if you save in a Sacco, either for a business or something else that you want to do. Then there is that you can be able to access loans from a Sacco.

Another advantage is the sense of community support.

Most of the Saccos that we have were started out of the community factor. Or even in your normal community. And they normally trust each other. The members trust each other, or the founders trusted each other. So it fosters trust and also networking.

However, Saccos also come with their disadvantages.

“There is limited liquidity. You cannot just wake up in the morning and decide that I want to withdraw my funds. You need to give a notice and of course the notice has to be approved. Most Saccos require 60-day notice,” Njeri warns.

She also stresses the importance of choosing a well-regulated Sacco.

“Most of the SACCOs are not well regulated. So you’re risking losing your money in case you save in a SACCO that is not well regulated. And there are two things that I want people to consider while choosing a Sacco. While saving in a SACCO, most of the people say that my SACCO is well known. There are differences between a SACCO that is popular and a SACCO that is well-regulated. So you need to save your money in a SACCO that is well regulated and not in a SACCO that is popular.”

Saving in a Money Market Fund (MMF)

Money market funds (MMFs) present an attractive option for those seeking higher returns with relatively low risk.

“Generally, a money market offers better returns compared to banks. And, of course, compared to a SACCO, you can easily access your funds from a money market account within 24 to 72 hours,” Njeri states.

She adds that Money markets are low-risk because they invest your deposits in government securities, such as T-bills and T-bonds. These are highly detailed instruments, making it safer to save in a money market account. They also consider the factor of inflation, often providing more earnings when you deposit your money, as the interest can offer a good return.

Disadvantages of saving in Money Market Funds

“Just like banks, money market accounts have management fees, usually around 2%, which might eat into your returns. Compared to banks, where you can use your ATM card to withdraw money instantly, money market accounts require a waiting period of 24 to 72 hours.”

Another challenge is the uncertainty of returns. “There are no fixed returns since they depend on market performance. For example, a money market account earning around 13% today could shift to 12% or 11% because of market fluctuations.”

The bottom line

As Njeri summarises, she insists that there is no one-size-fits-all solution.

If you save in a bank, you’re prioritising emergency funds or quick, guaranteed access to your money.

Saving in a SACCO allows you to access affordable loans while earning competitive interest. On the other hand, a money market fund is ideal for short- to medium-term savings with high returns and liquidity, as you can access your funds within 24 to 72 hours.

“You need to check the three key factors: liquidity, risk tolerance, and your financial goals,” Njeri concludes.