- I began to consistently save my excess cash starting that July. I even sent more money to this account than to my bank savings account.
- I was earning an interest on the cash invested. As I mentioned, it wasn’t much but it was still an income.
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I have a money market fund account with an insurance company. I opened the account last year July.
I remember telling GB I’d open it, and he asked, “Sweetheart, what’s this account going to be for?”
And I told him, “I honestly don’t know. But I have a feeling I should have one.”
So I carried on as I’d planned. I went to the company's offices, got my paperwork in order – ID, PIN and the usual requirements – then emailed them to wait for my account number. They emailed it back the next day.
I sent Sh2,500 to activate the account and I was in business.
That was July 2018. We’re now in April – I can tell you with confidence what the account is for. (And why you should consider having one yourself.)
So here’s the thing: I had a couple of side-hustles last year that returned some good income.
It was excess money. Money I didn’t need right away but which I knew I’d need someday soon, either for an emergency or to reinvest in another project.
I didn’t want to put the money in my Sacco because that’d mean it was inaccessible to me; I would only access it through a loan. Borrowing my own money is one of the biggest ironies of a Sacco. And, before I’d get my own money through this loan, there’d be the lengthy and painful process of making the loan application. (To tell you the truth, filing that paperwork gives me the headache of all headaches. Especially searching for guarantors. It’s utterly off-putting.)
CONSIDERING MY OPTIONS
I didn’t want to leave the money in my current account because I’d have spent it on stuff I didn’t need. Like maybe more shoes and more dresses for my wardrobe, more shades of lipstick, more cutlery for my kitchen...You know how these things go.
This money was too hard-earned to squander.
Besides, current accounts are a cash conduit. They’re like a flowing river. Cash moves in and out, en route to its final destination in the sea.
I didn’t want to put it in my savings account with my other bank because – again – it would be easily accessible to me, either through mobile banking, on M-Pesa, or through the ATM.
I considered prepaying my insurance policies and sleeping easy for the rest of the year. That, however, would have been an opportunity lost to earn some income on the money; either through interest or through reinvestment.
I didn’t want to invest it in an asset – like the stock market or a physical asset – because I wanted to be liquid. I wanted to have cash not too far away for when I needed it.
BENEFITS OF THE MONEY MARKET FUND
I shopped around and a money market fund checked all the boxes for a short-term investment vehicle, because of these simple reasons:
a) I’d earn interest on cash invested (though not much and not at the beginning. I’d make more as my savings grew. I learned later that the interest is compounded as time goes by. That means it has a time value attached to it.)
b) I’d be liquid. I was allowed one free withdrawal every month. Any other withdrawal within the month would cost Sh500.