Life has a way of throwing surprises at us-- some good, some bad. One day, everything is running smoothly, and the next, disaster strikes. A sudden job loss. A medical emergency. A business funding cut. Tax and levy increases. A flood that washes away everything you've worked for. If there's one lesson recent events in Kenya have hammered home, it's that financial preparedness isn't a luxury, it's a necessity.
The reality is, Kenyans are feeling the squeeze. The cost of living keeps rising, currency fluctuations, and many people are just trying to make it to the end of the month. There's barely room to breathe, let alone save. But the hard truth is that when disaster strikes, having a financial cushion can mean the difference between staying afloat and drowning in a crisis.
Consider the recent job cuts in Kenya due to shifts in donor funding, which has left thousands suddenly unemployed. For those without savings, it becomes a struggle to cover essentials like rent, food, and school fees. The same story played out during the COVID-19 pandemic when more than 738,000 Kenyans lost their jobs, businesses shut down, and families had to stretch every shilling just to survive. Then came the floods that displaced over 281,000 families and fires that left many homeless. Each time, the pattern repeats itself. People find themselves caught off guard, forced to rely on loans, support from friends and family, or sheer luck to recover.
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Imagine if more people had an emergency fund to fall back on. Think about how much easier it would be to deal with a job loss if you had savings set aside to cover your rent, food, and transport for a few months. Picture the relief of knowing that when your child's school fees are due, you don't have to scramble or take a last-minute loan because you've already saved up for it. It's not just about avoiding stress; it's about having control over your financial future.
You should aim to build an emergency fund that covers at least six months of your regular monthly income.
One of the smartest ways to build this financial cushion is through money market funds. Unlike regular savings accounts that offer tiny interest rates, money market funds allow your money to grow while remaining accessible when you need it most. It's a win-win--you earn more while keeping your funds liquid. And the beauty of money market funds is the compound interest which simply means that your interest also earns interest. Interest is calculated on the principal investment and the interest accumulated. This creates a snowball effect, where the investment grows faster as time goes on.
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Emergency funds are a great start, but they're not the whole picture. There's another tool that can make life a lot easier: sinking funds. A sinking fund is a savings strategy where you set aside money regularly for a specific future expense like school fees, car repairs, home maintenance, or even that big holiday you've been dreaming of. Instead of waiting until the last minute and panicking, you can plan ahead. Just imagine how much better it would feel knowing you've already saved for your child's school fees months in advance, or that when your roof starts leaking, you have money ready to fix it without going into debt. Saving little by little overtime makes these big expenses feel a lot less overwhelming.
Businesses, too, need to take financial preparedness seriously. Many Kenyan startups that depended on external funding are now facing uncertainty due to shifts in donor support and investment trends. Without financial reserves, some businesses are on the brink of collapse. Whether a company is big or small, having a financial buffer--whether through reinvested profits, diversified revenue streams, or emergency savings--can make all the difference when tough times hit.
Start by checking your current savings--how much do you have? Is it enough for an emergency? If not, set clear goals for your emergency and sinking funds. And remember, you don't need to save big all at once--small, consistent contributions add up over time.
Finally, use smart tools like money market funds to grow your savings while keeping them accessible. Because when life throws you a surprise (and it will), you'll be ready and prepared.
So, what's your financial game plan? The best time to start was yesterday. The next best time? Right now.
The writer is Britam Asset Managers CEO & Principal Officer
