Many external and internal crises have significantly contributed to the high cost of living that Kenyans have been complaining about. Covid19 brought the whole country and the world to a standstill between 2021 and 2022. This was followed by the Russia-Ukraine war from 2022 to date. US President Donald Trump initiated the trade war with tariffs in April 2025. The Israel-US versus Iran war in the Middle East is currently underway.
Many of these external shocks have led to a collapse of global supply routes, with the resultant dramatic rise in inflation (The general rise in the prices of goods and services ), interest rates for loans, and loss of value of the Kenyan Shilling, making loans, diesel, petrol, paraffin, electricity, plus other goods and services, more expensive for ordinary Kenyans.
Government policies have led to increased taxes, the introduction of an affordable housing tax for employees and employers, increased NSSF pension contributions, and a dramatic hike in SHA medical insurance premiums. Other public policies have removed or reduced subsidies, or failed to offer them, to protect Kenyans from these economic shocks. The end result is a worsened cost of living for the ordinary Mwananchi. The ease of doing business conditions for MSMEs are also worse off.
There are many simple ways Wananchi can protect their savings and beat inflation in this high-inflation era. The investment-based solutions require that their returns exceed the inflation rate. The non-investment-based solutions require you to seek cheaper substitutes and invest in financial literacy.
Is Holding Cash Money an option for Kenyans?
The investment return on cash is zero. Because money loses value as inflation rises, keeping cash always results in a loss equal to the inflation rate.
However, people will keep cash for transactions or as an emergency fund for a rainy day. What this means for you is that the best decisions involve minimizing cash holdings to the bare minimum for transactions or as a precaution in case anything happens, while putting most of the cash into speculative investments that can provide a return, hopefully above the rate of inflation.
Chart 1 below shows the zero return on cash while inflation remains way up, and so the negative return is equivalent to the rate of inflation.
Investing in a Savings Account
The other option Mwananchi can use is to open a savings account. This is slightly better than cash, but unfortunately the interest rate paid by banks to customers on their savings has never been above the rate of inflation.
This means if you subtract the rate of inflation from the the savings account interest rate, the return is always negative. This means your savings lose value every year. They are worth less and less in terms of the goods and services they can buy you. Chart 1 below shows the low return on savings accounts while inflation is above, and so the return is negative.
Investing in 7 Days Call Deposits and Fixed Deposits
Investing in call and fixed deposits is definitely better than cash or a savings account at any given time because their returns are higher.
However, not all customers are able to earn returns on these two options above the inflation rate. What this means for you is that if you are an ordinary Mwananchi with low amounts to invest in fixed deposits and low financial knowledge to negotiate with financial institutions, you may not be able to get an interest rate above the rate of inflation. Your rate of return after subtracting inflation may therefore be negative.
Also Read: How to Send Money Internationally: Cheapest Methods in 2026
The rich customers and large, sophisticated corporates are the ones who are sure that fixed deposit investments always beat the rate of inflation. This is because they are attractive to financial institutions as they have hundreds of millions or billions to place as fixed deposits. They also have a lot of knowledge to aggressively negotiate high interest rates that are very close to, equal to, or sometimes above the interest rate on the 91-day Treasury bill. Chart 1 above shows the comparison of return on fixed deposits normally above the inflation rate.
Investing in Treasury Bills and Bonds
Buying Treasury Bills and Treasury Bonds from the Central Bank of Kenya is a sure bet in beating inflation. What this means for you is that their interest rates never fall below the rate of inflation unless in extremely rare times. In the unlikely event that their interest rates fall below inflation, they will attract no sophisticated, knowledgeable corporate buyers (banks, insurers, pension funds, Saccos) and even retail investors (individuals, Saccos, churches).
They also have the advantage of being risk-free, as the government of Kenya has never failed to pay the buyers of Treasury Bills and Treasury Bonds. They are also classified as near cash, which means their market is very liquid and thus very easy to convert them to cash if one needs to sell them. Chart 1 above shows the comparison of higher returns on Treasury Bills and Treasury Bonds above the inflation rate.
Investing in Money Market Funds (MMFs)
Proven high-return, regulated, and well-managed Money Market Funds (MMFs) are inflation busters, as their returns consistently exceed the inflation rate. What this means for you is that they invest your money in Treasury Bills and Treasury Bonds and are able to negotiate high Fixed Deposit rates while maintaining low levels of cash, only the amount required to pay out returns or those who want to sell off their investment units.
Investing in Listed Stock Market Shares
Companies with a track record of paying good dividends and rising share prices can guarantee that their total share return rate exceeds inflation. The only problem is that returns on shares are cyclical, meaning they rise when the economy is doing well and fall the it is doing badly. What this means for you is to do your research and invest in specific companies which are so well run that they deliberately defy this see-saw of rise and fall of the economy every time without fail. It also means you should know and selectively invest in income shares which pay high dividends or growth shares whose value on the stock market continues to rise year in year out well above their peers.
Investing in Real Estate, Real Estate Investment Trusts (REITs) and Land
Real estate, Real Estate Investment Trusts (REITs), and land are widely known as good bets for beating inflation and as a long-term store of wealth. Their returns or value increases over the years have beaten inflation. What this means for you is that you need to select the perfect location to buy land or build rental houses to guarantee a rise in value of the land or a higher return on your rental buildings.
Also Read: Kenya Loses Jobs for the First Time in 16 Months – Here Are Sectors Firing Employees
It also means you always need to subtract the REIT’s return from the inflation rate to ensure the difference is not negative.
Buy Gold or Units in Gold Investment Fund and Buy Dollars or Units in a Dollar Currency Investment Fund
Investing in gold and dollars, or buying units in a gold investment fund and a dollar currency investment fund, is widely regarded as a sure bet for beating inflation. What this means for you is that gold prices and the exchange rate of the dollar against the Kenyan shilling, for example, rise at a faster rate than inflation. This is because of sudden hikes in extremely high demand by investors from across the world, as gold and dollars are widely recognized as safe assets to buy and keep when there are crises anywhere in the world.
Tips on Simple Ways to Protect Your Savings and Beat Inflation
- Prioritize getting training and reading books on personal financial management.
- Keenly review your budget and weekly spending patterns to cut creeping inflation.
- Put the largest portion of your savings in high-earning fixed deposits.
- Save with at least one stable and SASRA-regulated Sacco.
- Automate transfers from your savings account to investment accounts.
- Use a Matatu instead of driving your car to reduce your monthly fuel expenses.
- Share a car or a taxi to work to minimize monthly fuel costs.
- Use your savings to pay off your high-interest loans.
- Search and take advantage of Buy One Get One (B-O-G-O) sales offers by supermarkets.
- Cut out spending on luxuries.
- Eat homemade food to reduce your monthly food expenditure.
- Protect your health by exercising and eating well to protect your savings and wealth.
Frequently Asked Questions (FAQs)
- Is training or reading books on financial literacy important? Investing in financial knowledge throughout your life is one of your smartest decisions ever.
- Why should I reduce my cash holdings to the bare minimum holding of cash? This is because cash gives you zero return, and so inflation reduces the value of your money every day to levels where you can only buy fewer and lesser goods and services with your money.
- Should I use my savings to pay high-interest loans during periods of high inflation? High-interest loans become even more expensive during periods of high inflation. Since returns on your savings are much lower than both loans and inflation, using your savings to pay down the loan is full of Solomon’s wisdom.
- What should I do to ensure that all my investments beat inflation? Always subtract the rate of inflation from the rate of return from each of your investments. If the difference is positive, keep the investment. If the difference is negative, sell the investment, as it is losing your money, because if you sell it, the money you get can only buy you fewer and fewer goods or services today or in the foreseeable future.
Follow our WhatsApp Channel and X Account for real-time news updates.
