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Savings Accounts

All You Need to Know About Savings Accounts in Kenya - GUIDE

Kelvin Kiogora
October 14, 2021

When you want to save up money for something, such as a car, a house, or even a trip to the coast, you have several options. 

You could keep the money in a current account, or, you could keep the money in a piggy bank or in a safe in your home. . 

However, if you want to hit your savings goals easily, while at the same time keeping your money safe and secure, opening a savings account is a great option.

However, this doesn’t mean that every savings account available will work best for you. You need to find a savings account that is best suited to your needs and goals.

In this guide, we are going to give you a rundown of everything you need to know about savings accounts, including what savings accounts are and how they work, the benefits of savings accounts, factors to consider when choosing a savings account, and so much more. Let’s dive in…

What Are Savings Accounts And How Do They Work?

A savings account is a basic type of account offered by banks and other financial institutions, that allows you to earn interest on your deposits. 

If you keep Ksh100,000 in a current account for a year and make no withdrawals, you’ll have Ksh100,000 at the end of the year. If the type of current account you have charges account management fees, you’ll actually have less money than you deposited at the end of the year. Currents accounts typically do not earn any interest due to the fluidity they offer

With a savings account, on the other hand, your money keeps growing. For instance, if you keep the same Ksh100,000 in a savings account offering 8% interest per annum with yearly interest payouts, you’ll have Kshs108,000 at the end of the year.

In addition to allowing you to earn interest on your money, many savings accounts also have a limitation on the number of withdrawals you are allowed to make. Some savings accounts only allow you to withdraw your money from a bank teller, and do not come with a debit card.

This provides a psychological benefit – with your money less accessible, you are less likely to spend the money on impulse expenses you had not planned for, which in turn makes it easier for you to achieve your savings goals.

How does the bank afford to pay you interest on money deposited in a savings account?  

When you deposit your money in a savings account, the bank lends the money to other borrowers at an interest. They then use the interest paid by these borrowers to cover their operational expenses and pay you interest on your deposit.

Types of Savings Accounts

There are three major types of savings accounts offered by financial institutions in Kenya. These are:

  1. Regular Savings Account

This is the most basic type of savings account. A regular savings account doesn’t come with many conditions – there are no limitations on how much money you need to deposit per month, how long you need to keep the money in the account, and so on.

The regular savings account is best suited for someone without a very specific savings goal in mind, such as someone who is just saving money for a rainy day, or one who simply wants to build up a pool of money as they figure out how to invest or spend the money. 

A regular savings account also gives you access to your money whenever you need it, provided it is within the stipulated guidelines. 

For instance, if your savings account allows you to make one withdrawal per month, you can withdraw whenever you like, provided you don’t exceed one withdrawal per month. Going against these guidelines may usually attract penalties including losing accumulated interest.

  1. Fixed Deposit Account

A fixed deposit account is a special type of savings account that requires you to deposit a lump sum of money for a specific amount of time, usually referred to as tenure. Once you make the deposit, you cannot access the funds until the tenure has lapsed.

For instance, if you deposit Ksh1 million into a fixed deposit account with a tenure of 1 year, you will not have access to the funds until the 1 year tenure has lapsed. Some financial institutions do allow you to withdraw money from a fixed deposit account before its maturity, but this will come with penalties which is typically forfeiture of interest earned in the respective period.

Another thing to keep in mind when it comes to fixed deposit accounts is that you cannot add more money into the account until the end of the tenure. For instance, if you put Ksh1 million into a fixed deposit for a duration of 1 year, you cannot decide to add an extra Kshs100,000 into the account the following month.

While fixed deposit accounts are highly illiquid, they compensate for this by offering a fixed interest rate until the end of the tenure. Even in the event of interest rate fluctuations in the market, your specified interest rate is guaranteed.

  1. Target Savings Accounts

These are savings accounts that allow you to save money towards a specific target, such as the purchase of a house, education funds, saving for your children, saving for a holiday, and so on.

With target savings accounts, you set your savings targets with the financial institution providing the savings account, and then start making deposits into the account until you achieve your target. You will be restricted from making withdrawals from the account for any other purpose.

For instance, if you have a target savings account for the Christmas holidays, you’ll only be able to withdraw funds from the account during the Christmas holiday season. 

Similarly, if you are saving for your kids, you’ll only be allowed to withdraw funds from this account once your kids reach the agreed upon age, say 18 years.

The beauty of target savings accounts is that they prevent you from misusing funds meant for a specific purpose.

Factors To Consider When Opening A Savings Account

Savings accounts from different financial institutions come with different terms and conditions, and not every one of them will be suitable for your needs and goals. 

Therefore, before opening a savings account, there are some factors you need to take into consideration. These include:

What Are You Saving For?

The first thing you need to take into consideration is your savings goals. Why are you saving money? This will help you determine which kind of savings account works best for you.

If you are saving simply to build a nest egg that you can turn into in case of an emergency, or one that you can use for unspecified investment purposes in future, a regular savings account could work best for you, because it offers more liquidity of your funds.

If you are saving money to go towards a major expense, such as buying a car or taking your family on vacation, a target savings account often works better, because the money is less accessible. A target savings account also works when you are saving for retirement. You can request your bank to make these funds available to you once you reach retirement age.

If you are looking for a way to save money for a specified period of time and grow your funds during this period, a fixed deposit account is your best option, since fixed deposit accounts typically offer better interest rates compared to other types of savings accounts. Note, however, that this will differ from one financial institution to another.


What level of convenience are you looking for when it comes to accessing your funds? 

Do you want to be able to access your savings online, or do you prefer only being able to withdraw your funds in person from a brick-and-mortar bank branch? Do you want a savings account that allows you to have an ATM card?

It’s good to note that convenience is not always a plus when it comes to savings accounts. The more convenient it is to access your savings, the more likely you are to spend the money on something unplanned.

However, if you have to go to the bank physically and stand in a queue before you can access your money, you’ll be less likely to go and withdraw money from your savings account unless it is absolutely necessary for you to do so.

Is There A Minimum Opening Deposit?

To open a savings account, some financial institutions will ask you to make a certain initial deposit. Generally, accounts with no minimum opening deposit are preferred, especially for beginners because you can open such accounts even if you don’t have any money at the time. 

Is There A Minimum Interest Earning Balance?

Some financial institutions will require you to have a specified minimum balance before you can start earning interest from your savings. This minimum interest earning balance could be as low as zero, and sometimes, it could go as high as Ksh100,000.

When saving your money in a savings account, you definitely want this money to earn you some interest, so this is a very important consideration.

For instance, if a savings account has a minimum interest earning balance of Kshs100,000, and you intend to deposit Kshs 10,000 into the account every month, it will be close to a year before you start earning any interest on your savings. 

In addition, if you withdraw some money from the account, leaving a balance of below Ksh100,000, you’ll stop earning interest on your savings until your balance gets to Ksh100,000 again.

Therefore, keeping other factors constant, it is more advisable to go for savings accounts with lower minimum interest earning balances, since this allows you to start earning interest on your savings much earlier.

However, note that some banks offer better interest rates for accounts with a higher minimum interest-earning balance which would then make them more attractive depending on the amounts you are planning on saving. 

Interest Rate

Another important consideration to keep in mind is the interest rate paid by the bank on savings accounts. The higher the interest rate, the more money you are going to have in your account when you decide to withdraw your savings.

Savings accounts in Kenya offer interest rates ranging from as low as 0.5% per annum to as high as 8% per annum. Keeping other factors constant, you should go for savings accounts that offer higher interest rates.

When looking at the interest rate offered by a savings account’ it’s also important to compare the interest rate to the inflation rate. For instance, the annual average inflation in Kenya between June 2020 and June 2021 was 5.35.

If someone deposited their money in a savings account with an interest rate of below 5.35, this would mean that their money is losing value faster than it is earning interest. 

At the end of the year, the money would be worth less than it was when they made the deposit. It is therefore advisable to find a savings account that provides a higher interest rate than the average annual inflation rate.

Withdrawal Limit

How often are you allowed to withdraw from your savings account? Some financial institutions allow you to make unlimited withdrawals, while others only allow you to make 2 withdrawals in a year, with several other options in between.

When evaluating the withdrawal limit, take into consideration your needs, as well as your goals. For instance, if you are saving money for a specific purpose, you are better off going for a savings account with minimal allowed withdrawals.

If, on the other hand, you are just saving money that you might need to use at a moment’s notice, you are better off going for a savings account with unlimited withdrawals. 

Note, however, that you need to be very disciplined when using a savings account with unlimited withdrawals, otherwise you’ll find it very hard to build any substantial savings.

Account Fees

Finally, when opening a savings account, it’s also important to look at the fees associated with operating the account. While financial institutions offer savings accounts for free in order to encourage more people to save, it is still important to check whether the institution you are considering has any other fees, such as withdrawal fees, overdraft fees, penalties for exceeding withdrawal limits, and so on. Generally, you should try to avoid fees as much as possible, since they eat into your interest earnings.

Benefits of Savings Accounts

Having a saving culture – regardless of the reason behind saving or how you save – is very important. Saving gives you greater financial security, gives you something to fall back on in the event of an emergency, and provides you with funds that you can invest.

That said, saving your money in a savings account offers several benefits over other forms of saving. Here are some of the benefits of savings accounts:

Keep Your Money Safe

Saving your money in cash at home puts your money at huge risk. In case of something like a burglary or a fire, you could easily lose all your savings. When you keep your money in a savings account, however, you are guaranteed of the safety of your funds.

Even if something were to happen to the financial institution where you have your savings account, the savings are insured by the Kenya Deposit Insurance Corporation (KDIC). You can read more about this here>> How customer bank deposits are protected by law.  

What’s more, unlike keeping your money in the form of financial instruments like money market funds, you cannot lose the principal amount deposited in a savings account. This means that your money is totally safe in a savings account.

Grow Your Money

The greatest benefit of savings accounts is that they pay interest on the funds in your account. Granted, the interest rates are usually not very high, so don’t expect to make enough money to live off from the interest earned on your savings. Still, any interest earned is important, because it is money you did not have.

For instance, if you kept Ksh1 million in a current account or in a safe in your bedroom for a year, you’ll still have a million shillings (without accounting for inflation). 

However, if you kept the same Ksh1 million in a savings account, you’d have an extra Ksh10,000 – Ksh100,000, depending on the interest rates offered by your savings account. This is money you earned doing absolutely nothing over the course of a year.

Achieve Your Financial Goals

Another great advantage of savings accounts is that they make it easier for you to achieve your financial goals. When you have your money easily accessible, there is a high chance that you might end up spending it on things you had not budgeted for.

For instance, imagine you’re hanging out with friends on a weekend, and a random “Vasha” plan comes up. When you have the money easily accessible to you, it becomes very easy to go along with the plan, even if this is something you had not budgeted for and could derail you from your financial goals.

Savings accounts keep such temptations at bay by making your money harder to access, either through withdrawal limits, or by the inconvenience of having to make withdrawals in person for accounts with such limitations.

By making your money harder to access, savings accounts make it easier for you to save and achieve your financial goals.

In addition, you can automate your savings by setting up automatic deposits from your current or salary account into your savings account. This way, saving becomes easier, because it is not a conscious decision you have to make every month – which can be difficult for most people.


While many savings accounts make it harder for you to access your money compared to current accounts or keeping your money in cash, they are still relatively liquid. If you want your money quickly, you can easily access it within a short time, provided you are within your withdrawal limits. 

However, this only works for regular savings accounts. For target savings accounts and fixed deposits, you’ll face penalties for withdrawing your funds prematurely.

How To Open A Savings Accounts

The process of opening a savings account is pretty straightforward. Below are the steps you need to follow when opening a savings account:

Step 1: Decide On Account Type

The first thing you need to do is to determine the kind of savings account that is most suitable for you. Do you need a regular savings account, a fixed deposit account, or a target savings account? This decision should be based on your savings goals.

Step 2: Compare Institutions

Once you know the type of savings account you want to open, the next step is to compare the different banks and financial institutions offering this type of savings account.

Your comparison should be based on the factors we covered earlier, such as interest rates, minimum initial deposits and minimum interest earning balances, withdrawal limits, account and transaction fees, convenience, and so on.

Money254 has made it easier for you to compare all the flexible savings accounts in Kenya through our savings account comparison tool here

Step 3: Prepare Your Personal Documents

The personal documents required to open a savings account will vary from one financial institution to the other. However, most will require you to provide your national identification card and your KRA pin. You can confirm the required documents with your chosen financial institution.

Using the Money254 Savings Accounts tool, once you decide on the financial institution, click on details to see all the eligibility requirements and additional information for the type of account you have chosen. 

Step 4: Open And Fund Your Savings Account

Armed with the requisite personal documents, you can now go ahead and open your savings account by either visiting a bank branch, or doing it online if your chosen financial institution allows that.

Once your account has been set up, you can make your first deposit into the account and start saving.

Wrapping Up

If you’ve been thinking about putting some money aside, either to fund a major purchase, to accumulate some money that you can invest, or even to give you some security in case of an emergency, you’ll never go wrong with a savings account.

Savings accounts not only keep your money safe, they also allow it to grow from accrued interests, while at the same time helping keep you disciplined in your saving efforts.

In this article, we’ve covered all you need to know about savings accounts, including what you need to look at when choosing a savings account, as well as how to open a savings account. If you’re thinking of opening a savings account but are having trouble choosing a suitable one for your needs, you can use our savings account finder tool to find a flexible savings account that works for you.

Kelvin is a top-notch writer whose passion is to help businesses maximize their reach and conversion through excellent and engaging content. He has the uncanny ability to make the most complex subject matter simple and easy to understand. You can find Kelvin on Linkedin.

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