Financial planning
Personal Finance in Kenya: The 4-Pillar Guide
A practical, evergreen playbook for Kenyan households and diaspora supporters. Build a resilient plan around Savings, Investments, Insurance, and Retirement—with simple checklists and tools.
- Emergency fund: 3–6 months of expenses in a regulated MMF or a well-governed SACCO savings account.
- Insure first: lock in Health, Personal Accident, and Life so your plan survives shocks.
- Invest steadily: start with government bonds & diversified unit trusts; automate monthly buys.
- Pension tax relief: contributions up to KES 30,000/month (KES 360,000/yr) are deductible; add PRMF up to KES 15,000/month if relevant.
- Automate remittances into an MMF/SACCO "family fund".
- Add IPMI/health cover options for cross-border treatment.
- Nominate beneficiaries; align life cover with school fees & mortgage plans.
Cashflow & Debt Foundations
Before investing, get the cashflow basics right: automate pay-yourself-first into your emergency fund and pension, run a simple budget you can actually stick to, and clear high-cost debt quickly (then term loans). Once your safety net and essentials are covered, scale contributions to investments.
Quick Budget Allocator
Essentials: —
Goals: —
Flex: —
Tip: route “Goals” to MMF (emergency) and pension first; invest only after those are funded and high-cost debt is under control.
Debt Paydown – Quick Wins
- List all debts (balance, rate, minimum, due date). Pay at least minimum on all.
- Choose a method: Avalanche (highest rate first) or Snowball (smallest balance first).
- Automate extra payments to the target debt; when cleared, roll the amount to the next.
- Avoid new high-cost debt; use SACCO/secured options when truly necessary, matched to asset life.
Ready to start? Open your Money Market Fund
Kick off your emergency fund and short-term goals in a regulated MMF. It takes a few minutes to set up online.
Disclosure: This is our referral link. There’s no extra cost to you.
2 Pillar — Investments
Pillar 2 — Investments (Bonds, Unit Trusts, Shares, Land)
Build from low-risk to diversified: start with government bonds or income/balanced unit trusts, then add equities/REITs. Use a written IPS and automate contributions.
Starter path
- Open a CDS account or buy via unit trusts; avoid chasing yields you don’t understand.
- Use shilling-cost averaging; review annually.
- Keep speculation under 5–10% of your portfolio.
3 Pillar — Insurance
Pillar 3 — Insurance (Protect the plan)
Cover medical, income shocks, and dependants before you scale risk. Pair SHIF (statutory) with private health insurance for choice and higher limits. Add Personal Accident for disability/income protection and Life for dependants or debt cover.
Action checklist
- Confirm SHIF registration and employer remittance.
- Choose a private plan: inpatient limit, outpatient, maternity, chronic care, panel access.
- Life sum-assured: 8–12× annual income (starting heuristic) + major debts.
4 Pillar — Retirement
Pillar 4 — Retirement (Pension & PRMF)
Maximize tax-deductible pension contributions (up to KES 30,000/month). If available, add a post-retirement medical fund (PRMF) contribution (up to KES 15,000/month) alongside your pension to protect healthcare in retirement.
Action checklist
- Join an occupational or individual pension plan; set escalators (+5–10%/yr).
- Consolidate old schemes when changing jobs; keep beneficiary forms updated.
- Target 10–20% total savings rate; adjust with age and goals.
Tools & Calculators
Emergency Fund Target
Your target: —
Tip: Keep this fund in a regulated MMF or SACCO savings product and don’t co-mix with long-term investments.
Pension Gap Calculator
Required corpus at retirement: —
Projected at retirement: —
Gap: —
Suggested monthly contribution: —
Assumes monthly compounding; adjust returns to your product mix. Estimate only, not advice.
Kenya-Specific Frequently Asked Questions
What is the current pension tax-deductible limit?
Up to KES 30,000 per month (KES 360,000/year) in a registered pension/provident or individual retirement fund.
How does SHIF interact with private health insurance?
SHIF is the statutory baseline. Private health insurance complements SHIF with broader benefits, higher limits, and wider hospital access.
MMF vs SACCO—what should I use for savings?
Both can work. MMFs are unit trusts regulated by CMA; SACCOs are licensed/authorised by SASRA. Choose based on liquidity needs, fees, governance, and your goals.
References
- Capital Markets Authority (CMA): Collective Investment Schemes framework & guidance
- SASRA: SACCO licensing & regulations
- Insurance Regulatory Authority (IRA): market oversight for insurers
- Ministry of Health / Kenya Law: Social Health Insurance Regulations (2.75% of gross pay)
- Kenya Revenue Authority (KRA): PAYE – pension contributions deductible up to KES 30,000/month; PRMF up to KES 15,000/month
