How to Invest Your Savings for Short-Term Goals


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How to invest for goals that are less than 3 years out, in short-term investment vehicles. 

Are you trying to save for something big in the next 3 years? A wedding? More education? Emergency fund? A new car? Vacation? Saving and investing for these things is different from investing for retirement or your baby’s university education.

There are very many avenues to make short-term investments and the right option depends on your individual situation and preference. As you look to save up for your short-term goals, you also need to make careful consideration of the investment vehicle. Remember, you don’t need to go into debt to pay for any of these things.

Here is how to invest and save for your short-term goals:

1. Savings Accounts

Savings accounts are a great secure place to stash away money to meet short-term goals. They offer a low-risk return, high liquidity and also guarantee to never lose capital. Savings accounts could earn you as much as 7% per annum – where some Kenyan banks calculate this once a year, every six months and very rarely monthly. It is quite a straightforward option, just look out for the best return for your money.

2. Chamas – Lending Clubs

Chamas’ are quite popular nowadays and have evolved to be quite sophisticated investment societies. They typically take on a peer-to-peer lending structure, such as a merry-go-round, or are formed through a pooled investment with shares. The structure and purpose of a Chama totally depend on members needs or common goal. They earn money from lending members or making joint investments in businesses or real estate.

3. Certificate of Deposits (CD)

Certificates of deposit offer predictable guaranteed returns for investors. A CD requires that you hold it for a set period i.e., seven days, one month, one year and so on. If you cash out sooner than the stipulated period, then your account attracts a penalty. These penalties sometimes range from one to six months’ worth of interest. They are a great option for short-term goal oriented investors who know exactly when they’ll need their money.

4. Money Market Funds

Many people park money they will need soon in money market funds where they can earn about 7% interest per year. This may not seem like a lot but when compounded over a few years, it makes a significant difference. Money market accounts are a great option for short-term investing because they are secure and quite easy to access.

5. Short-Term Bond Funds

The short-term bond fund is a mutual fund that invests in bonds that mature in one to three years. They consist of a portfolio that invests mainly in treasury bills and bonds, mortgage-backed securities and corporate bonds. These funds seek to limit risk by investing in short-term debt securities where the risk of interest rate rise or a default is reduced significantly. They are a great option for investors looking to earn a little more return within a short period of time.

6. Treasury Bills and Bonds

Government Treasury Bills and bonds are issued by the Government of Kenya and offer a great return for investors. Treasury bills run on a 91-day, 182-day, and 364-day cycle. They are currently offering an annual interest of 7.6%, 8.9%, and 9.8% respectively. On the other hand, treasury bonds offer both medium-term (less than 10 years) and long-term bonds that pay interest every 6 months. The Central Bank of Kenya auctions treasury bonds on a monthly basis. Treasury bills and bonds are a great predictable source of income, which you can reinvest to meet your short-term goals.

7. M-Akiba Bond

The M-Akiba bond is an infrastructure and development bond, with an investment tenure of 3 years. This bond is tax-free, easy to access and highly liquid investment option. It pays an interest of 10% per annum, semi-annually. The bond also has a minimum investment of Kes 3,000, making it highly accessible to all. The M-Akiba bond is a great short-term investment instrument as if offers investors convenience, low investment minimum, and good returns as well.


Here is a short summary of the best places to invest your savings for short-term goals, as per the above explanations of each:

InvestmentQuick FactsPotential Return
Best for short-term investment goals, less than 3 years
Savings Accounts
  • For an emergency fund
  • Highly liquid
Best for medium-term investment goals, 3 -10 years horizon
Chama’s – Lending Clubs
  • Low investment minimum
  • Low liquidity
  • Higher risk
12% – 20%
Certificate of Deposits
  • Not so liquid
  • May attract penalties on early withdrawals
  • Offers hard maturity dates i.e. 7-days, 1-month, 3-months etc.
  • Insured
6% – 9%
Money Market Account
  • May have an investment minimum
  • Highly liquid with low risk
  • Interest is compounded daily
Short-Term Bond Funds
  • May have an investment minimum
  • Liquid with some risk
7% – 10%
Treasury bills and Bonds
  • May have an investment minimum
  • Offers a great source of predictable income
  • Liquid with low risk
7% – 10%
M-Akiba Bond
  • Low minimum investment
  • Pays interest semi-annually
  • Liquid

What Next?

Before you make a decision on what short-term investment instrument vehicle to use, think about why you are investing. What are your life goals? After determining that, create a timeline. Then align your goals with the investment vehicle that best fits your goal. A timeline can help you figure out how liquid – or accessible – you need your money to be. For example, a dream trip to Hawaii in 3 years or so, means you need to invest in a security that matures in 3 years and is easily accessible. On the other hand, assume you need to save and invest for a wedding anniversary trip set 10 years from today. Here, you will be looking for investment instruments with a longer range and that is less accessible. While you consider the timeline, you also need to take a look at risk. Risk affects how much return you get and where you choose to save or invest. Keep in mind that reaching for higher yields, means assuming greater risk.


Meanwhile, you can click on the following links to read more about financial planning:

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Irene Makanga
Irene has an MBA in Finance and is an avid businesswoman, passionate about financial literacy.


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