Money Market Funds vs. Savings Accounts: Which is Better?

Saving is cool but investing is where the money is made. Money is meant to stay in motion, and it's meant to stay in motion for a number of reasons. The obvious reason is you most certainly won't get any worthwhile profit out of your money if it's gathering dust in one of your many savings accounts. The second reason is tied to a financial concept called the time value of money. In layman's terms, this concept says money loses value over time. To put this into perspective, in 1986 if you walked into a supermarket with Ksh.600 you would leave with a large trolley full of all sorts of things. In 2024 if you tried that you’d spend the night in a holding cell for shoplifting. Let’s explore the features of both money market funds and savings accounts and see how platforms like the Ndovu App can help guide you through the process of choosing the best investment strategy to grow your money.

Understanding a Money Market Fund

Money market funds invest in short-term, low-risk financial assets like government securities, treasury bills, and commercial paper. Due to their low risk, they offer investors stable income in the form of regular interest payments. The main goal of a money market fund is to provide a higher return than a typical savings account while maintaining liquidity and low risk.

One of the most compelling reasons to consider a money market fund, like the Ndovu Fund, is that it offers much higher interest rates compared to savings accounts. The Ndovu fund currently offers a competitive 15.5% annual interest rate on investment capital. The returns from investing in a money market fund can help you grow your money faster, especially in the current economic environment where inflation can erode the value of stagnant savings.

What is a Savings Account?

A savings account is a traditional banking product that allows individuals to deposit their money while earning interest over time. Savings accounts are widely available in banks and offer high liquidity, meaning you can withdraw your funds at any time. However, the interest rates on savings accounts tend to be relatively low, especially in Kenya. This makes savings accounts more suitable for storing emergency funds rather than for long-term wealth growth.

Key Differences Between Money Market Funds and Savings Accounts.

While both a money market fund and a savings account offer safety and liquidity, the differences in returns and access make them suited to different financial goals.

Fund attributes	Money Market Fund	Savings account
Returns	Offer higher returns because they invest in higher-yielding financial instruments.	Offer lower interest rates compared to money market funds.
Accessibility	As much as they also offer high liquidity some money market funds have specific withdrawal rules like a notice period.	Offer immediate access to your funds making them ideal for emergency savings.
Risk	They are low-risk but are still subject to fluctuations in interest rates that might affect returns	Offer fixed interest rates set by the bank.
Inflation hedge	Money market funds, especially ones like the Ndovu fund, provide returns that outpace inflation.	Savings accounts can’t keep up with inflation, meaning your money will lose value.

Why Choose Ndovu?

Ndovu, a leading digital investment platform in Kenya, has made it easier for everyday Kenyans to invest in a variety of investment funds. Through the Ndovu App, you can seamlessly invest in the Ndovu Fund and enjoy the benefits of higher returns and professional management. The app allows users to track their investments, withdraw or deposit funds, and stay updated on their portfolio's performance.

The Ndovu App stands out for its simplicity, allowing even novice investors to start building wealth with a few taps on their smartphones. Whether you’re looking to invest for retirement, retirement, your child’s education, or any other financial goal, Ndovu provides the tools and expertise needed to make informed investment decisions.

Which is Better?

The answer to whether a money market fund or a savings account is better depends on your financial goals. If you’re looking for a place to store emergency funds or you need frequent access to your money, a savings account is a safe bet. However, if your goal is to grow your savings over time and earn higher returns, investing in a money market fund like the Ndovu Fund would be a smarter choice.

In conclusion, both savings accounts and money market funds have their place in personal finance. But if you want to see your money grow while keeping it relatively safe, a money market fund is the superior option.