I've officially spent a whole year out of college. Before I could even breathe a sigh of relief, I was bombarded with pressure from all sides. My dad wanted to know how my job applications were going. He seemed surprised I hadn't gotten any offers yet. My momma pleaded I stay home longer...
What more could you want that's out there, Joyce?
Uhm, freedom I guess?
I even put pressure on myself. Yes! I wanted to taste that adulting life everyone raved on and on about. And, Lord, did I taste it. Oh, I had myself a mouthful.
Friendships. Work. Relationships. Bills. Fun. Wait, back up. Bills! That's it! Adulting is all about bills upon bills upon bills upon... alright, I'll stop. You're catching on, though, aren't you?
If you're an adult, you know exactly where I'm headed. If you're not, you're probably nervous about wanting to get a head start as soon as you get there. Lucky for you, I got just the right remedy: the money market!
What is the Money Market?
The first time I heard about the money market, it sounded so interesting, like a God-sent gift that lets you sit back and relax while it makes passive money for you. Of course, I wanted in! So, I did some digging, starting with what exactly the money market is all about. So, what is the money market? Well, it's a cog on the larger economy wheel that lets you lend or borrow short-term funds. These funds are loans that typically carry a term period of a year (or less).
Various financial institutions and dealers dabble in running a money market service. They receive short-term funds from lenders and instigate their distribution to borrowers. Borrowers will pay off the lent funds with interest in the term period. The dealer will take their share of the paid interest and restore the original funds to the lender with the remaining interest. All these should be properly outlined in a preset contract agreement, so flesh out all the finer details before committing.
What is the Money Market Fund?
If, perhaps, all the finer details get jarring for you, don't worry. There are other simpler ways to still participate in the money market service and reap the benefits. A popular example nowadays is investing in a Money Market Fund. So, what is a money market fund, or MMF? An MMF is like a crowd pull of resources in layman's terms. It's where anyone can deposit liquid funds into. Thereafter, MMF managers invest these funds in short-term investments.
Ideally, the investments are low-risk strategies that ensure a relatively stable interest rate. After a span of, typically, one month, MMF managers take out their share of paid interest and then distribute the remaining interest to individual account owners. If you can decide to cash out your earnings or leave your MMF intact to continue to grow gradually in the following months.
Pros and Cons of Money Market Funds in Kenya
Can Money Market Fund Make You Rich?
How much can money market funds really make you? Is it wise to withdraw all your savings and put them into a money market fund, which I did anyway? At the core of it all, people want to know whether money market funds make you rich. So, let's settle the debate once and for all, shall we?
Before we can answer this question, you'll want to figure out exactly how much the interest rate is.
Best Money Market Fund in Kenya
However you want to assess it, the money market fund that makes you the most money is probably the basket where you'll want to place all your eggs. So, that's the logic we'll use for this one.
There are quite a good number of MMFs in Kenya. Let's see how they stack up.
A few things to keep in mind. Interest rates often change depending on the current inflation rate. Also, the interest earned is inclusive of tax. Most MMFs will allow you to withdraw your money at any time. However, you may need to give them 48 hours or more to process withdrawals into your account. MMFs are generally not suitable for long-term investing.
Even when the interest rates are high, the money you earn often gets towed over by inflation. So, while it’s a good place to keep your money safe in the short-term, and to keep your savings liquid, ultimately, you may lose money if you let the money sit in your MMF account for too long. You may withdraw only to find out that the amount of things you can buy has become pricier due to inflation.
If money market funds don’t sound like your cup of tea, you can always check out our “How to Start Earning Money Online Writing in Kenya” article, instead. Meanwhile, let us know of any questions or concerns, and we’ll get back to you pronto.