Is your money market fund beating inflation?

A post went round the Kenyan savings groups this week doing something almost nobody does: actual arithmetic. It set a money market fund's return against inflation and concluded the saver was going backwards.

It deserves credit for trying, and for getting the hard part right. It then got the easy part wrong three times, and every one of the three errors pushed the answer the same way.

What it got right

Inflation really is 7.3%. The Kenya National Bureau of Statistics put the 12-month rate at 7.32% for October 2026, published on the last day of the month. That is the highest since June 2023, when it was 7.88% — so "highest in three years" is fair, if anything understated.

And the trolley really does cost that. Ten thousand shillings of shopping a year ago needs 10,732 today. That is what the number means and it is the right way to explain it.

So the alarm is not manufactured. Prices have turned back up after two quiet years, and a lot of money is sitting in funds that have not turned up with them. Everything after this is about how much, not whether.

Three errors, all in the same direction

A fund's quoted rate is not an annual rate. Money market funds in Kenya quote the daily yield annualised — today's return multiplied out over a year, with no compounding in it. But the interest is credited daily and the withholding tax of 15% is taken as it is credited, so what is left compounds for the rest of the year. Taxing the yearly headline instead of the daily rate, as the post did, is the wrong order of operations. A fund quoted at 7.0% gross nets 6.13%, not 5.94%.

Real returns divide; they do not subtract. Taking 7.32 off 6.13 gives −1.19%. The honest sum is (1 + 0.0613) ÷ (1 + 0.0732) − 1 = −1.11%. Subtracting always gives the true answer multiplied by one-plus-inflation, so it always exaggerates — away from zero, in whichever direction the answer already points.

That last part is worth dwelling on, because the shortcut usually does the opposite. When a return beats inflation, subtracting flatters it. Here, with a return below inflation, the same shortcut makes the loss look worse than it is. It is not a conservative error. It is just an error, and it happened to be pointing somewhere frightening, which is precisely why no one in the comments checked it.

And the bar is not 10%. The post tells readers to find a fund paying above 10% to break even. Run it properly: a gross rate of 8.32% is where a taxed, compounded fund exactly matches 7.32% inflation. A fund at 10% gross nets 8.87% and earns a real +1.44% — not treading water, genuinely ahead.

What the corrected answer looks like

The conclusion survives, which is the main thing. A fund paying 7.0% gross is losing you purchasing power, and leaving money there is a slow decision with a cost. But the cost is about a fifth smaller than advertised, and the fix is nearer than advertised.

That gap is not pedantry. Someone told they need 10% when they need 8.32% goes looking for yield they did not need to look for — and in Kenya, the things paying well above the money market rate are not money market funds. They are longer, less liquid, or less regulated, and sometimes all three. A wrong bar sends people over it.

The part worth keeping

Strip out the arithmetic and the post is making an argument that is sound and unfashionable: a positive number on your statement is not a gain. Most savings products in Kenya are advertised gross, annual and nominal, and all three of those words quietly flatter. Net, compounded and real is the only version that tells you whether your money grew.

What it should not be used for is panic. Check where your fund actually sits, not where a screenshot says it sits.

Our comparison puts every rate we hold on one after-tax basis, with the date it was read. The inflation page carries the official series back to 2005 and shows what each rate leaves once prices are out. And the calculator will tell you what any rate does to a monthly habit over a decade, in today's money.

One thing we will not do is publish a rate we have not read from the manager ourselves. We can tell you exactly what 7.0% gross means. We cannot tell you, on the word of a screenshot, that any particular fund is paying it.