Treasury Bills vs Money Market Funds: Which Is Better for Your Investment Portfolio?
When the money finally starts accumulating
By the time Peter looked at his M-Pesa balance that Friday evening, he had KSh 180,000 sitting there.
It was not money he had received overnight. For almost two years, he had been putting something aside whenever his salary came in. Some months it was KSh 5,000. Other months, after paying school fees, rent and helping at home, he could only manage KSh 2,000.
Now the money had finally reached an amount that made him uncomfortable.
Leaving it in a normal transaction account felt wasteful. Keeping it in M-Pesa made him worry about spending it. But he also did not want to put everything somewhere he could not reach when his family needed it.
A friend told him about Treasury bills.
Another recommended a money market fund.
Both sounded sensible. Both were described as relatively safe. Both promised a return on money that was otherwise sitting idle.
Peter’s problem was not finding somewhere to invest.
His problem was deciding what the money was supposed to do before choosing where to put it.
That is where many investment decisions in Kenya go wrong. We start by asking, “Which one pays more?” before asking the more important question: “When will I need this money?”
That question makes the difference between Treasury bills and money market funds much clearer.
The two investments may look similar, but they serve different needs
Treasury bills and money market funds often end up in the same conversation because both are used by people who want to earn a return without taking the kind of price swings associated with shares.
But they are not the same investment.
A Treasury bill is a short-term government security issued through the Central Bank of Kenya. You lend money to the government for a specified period and receive the face value at maturity. Treasury bills currently come in 91-day, 182-day and 364-day maturities. CBK states that the minimum investment is KSh 50,000.
A money market fund works differently. You buy units in a collective investment scheme, and the fund manager pools your money with that of other investors. The fund then invests according to its mandate in short-term instruments.
The Capital Markets Authority describes collective investment schemes as pooled funds managed professionally on behalf of investors. Money market funds are one of the types of collective investment schemes regulated within Kenya’s capital markets framework.
So when you buy a Treasury bill, you are investing directly in a government security.
When you buy units in a money market fund, you are investing in a professionally managed portfolio.
That difference becomes important when you need your money.
A Treasury bill gives your money a destination
Imagine Peter decides that the KSh 180,000 is for a land deposit he expects to pay in six months.
That changes the decision.
He does not necessarily need the money tomorrow. He has a reasonably clear date when he expects to use it.
A Treasury bill could make sense in such a situation because the investment has a defined maturity period.
The current CBK offering includes 91-day, 182-day and 364-day Treasury bills. As of the latest figures available from CBK, the previous average interest rates were about 8.77% for the 91-day bill, 8.93% for the 182-day bill and 9.07% for the 364-day bill. These rates change with each auction, so an investor should check the latest CBK results rather than rely on an old rate.
There is something psychologically useful about this arrangement.
You know that the money has a job.
You put it away for a defined period and resist the temptation to dip into it whenever an attractive offer appears on WhatsApp or someone calls with a “business opportunity”.
But that same structure can become a problem when the money is needed unexpectedly.
A Treasury bill is therefore not automatically better simply because it is a government security. Its usefulness depends on whether your financial life can accommodate the maturity period.
And that brings us to the question many people overlook: how quickly can you get your money back?
The best investment can become the wrong investment when you need cash
Suppose Peter’s daughter needs an urgent medical procedure two months after he invests.
The investment itself has not necessarily become bad.
His circumstances have changed.
This is why liquidity matters.
Treasury bills are designed around maturity. If you buy a 364-day bill, you have committed the money to that investment for a much longer period than someone putting the same amount into a highly liquid savings vehicle.
There are mechanisms for trading government securities before maturity, but that is different from simply pressing a withdrawal button and receiving your money. For someone who may suddenly need the cash, the practical difference matters.
Money market funds generally offer greater flexibility because investors can request withdrawals according to the fund’s terms and processing arrangements.
The exact withdrawal period varies between fund managers, so it is important to read the fund’s offering documents instead of assuming every MMF works in exactly the same way.
This is why an emergency fund and a Treasury bill should not automatically be treated as interchangeable.
Your emergency money is supposed to be available because emergencies do not wait for maturity dates.
Once that becomes clear, the question is no longer “Which investment is safer?”
It becomes “How much flexibility do I need?”
What happens to your money inside a money market fund?
A money market fund does not simply put your cash into one place and wait.
The fund manager invests the pooled money according to the fund’s investment mandate. Depending on the fund, this can include instruments such as Treasury bills, fixed deposits and other eligible short-term investments.
That means an investor in an MMF is not personally choosing which Treasury bill to buy.
The fund manager does that work.
This is one of the reasons MMFs have become attractive to people who want to start investing but do not want to learn the mechanics of every individual security.
You can contribute regularly instead of waiting until you have a large lump sum.
You also get professional management and diversification within the fund’s permitted investments.
But there is an important point here.
Professional management does not mean guaranteed returns.
The return from a money market fund can change as the underlying investments and market interest rates change. CMA notes that the performance of collective investment schemes depends on the market value of the instruments held by the fund, and that money market fund yields are calculated daily.
That distinction is worth understanding before you compare an MMF’s advertised yield with a Treasury bill rate.
They are not necessarily measuring the same thing in the same way.
Do not choose an MMF simply because the advertised rate is higher
This is where investment conversations can become misleading.
Someone posts in a WhatsApp group:
“Fund X is giving 12%.”
Another person replies:
“Mine is giving 13%.”
Suddenly everyone wants to move their money.
But a quoted MMF yield is not a promise that you will receive that exact return forever.
Fund performance changes.
Interest rates change.
The investments held by the fund change.
And the return you care about is the return after relevant costs and taxes, not simply the biggest number appearing on an advertisement.
The CMA maintains a list of licensed and approved collective investment schemes and fund managers. Its current licensee information includes numerous money market funds from established providers as well as newer entrants.
That means you have more choices than ever.
It also means you have more responsibility.
Before moving money into an MMF, look at the fund manager, the fund’s investment mandate, fees, withdrawal terms, historical performance and the applicable regulatory information.
A high recent yield can be interesting.
It should not be the only reason you invest.
Treasury bills have one advantage that is difficult to ignore
For an investor who wants direct exposure to a short-term government security, Treasury bills offer something very clear: you know the security, the tenor and the maturity date before committing your money.
CBK sells Treasury bills at a discount. In simple terms, you pay less than the face value and receive the face value at maturity. The difference represents the return, subject to the applicable tax treatment.
For example, imagine you have money that you know you will not need for the next six months.
Instead of leaving it idle, you could consider a six-month Treasury bill and plan around its maturity.
That can work particularly well for money with a known purpose.
A business owner waiting to pay for equipment later in the year may use a short-term government security.
Someone preparing for a property transaction may also prefer an investment with a defined maturity date.
The attraction is not that Treasury bills magically produce wealth.
It is that they can give a lump sum structure and discipline.
Once the money is invested, you are less likely to treat it like ordinary spending money.
But there is another side to this discipline.
If you regularly receive small amounts and want to keep adding to your investment, a Treasury bill may not always be the most convenient tool.
That is where an MMF can become more useful.
Money market funds make regular investing easier
Not everyone has KSh 100,000 sitting in the bank.
For many people, investing starts with KSh 1,000, KSh 5,000 or KSh 10,000.
The important thing is not the size of the first deposit. It is whether the person can keep investing.
A young employee might decide to put KSh 5,000 into an MMF every month.
A freelancer might invest KSh 10,000 whenever a client pays.
A small business owner might transfer part of a good month’s cash flow into an MMF rather than allowing all the money to disappear into day-to-day expenses.
That flexibility is one of the strongest arguments for an MMF.
You do not have to wait until you have accumulated a large lump sum before beginning.
You can build the investment gradually.
Over time, the habit becomes more important than the first amount.
And this is where Peter’s situation starts to look different.
If his KSh 180,000 is for a land deposit six months from now, a Treasury bill may fit.
But if he wants to build a reserve that he may need at different times throughout the year, an MMF may make more sense.
The right answer depends on what sits behind the money.
What about taxes?
Investment returns should always be considered after tax.
KRA’s current guidance lists interest among incomes subject to withholding tax, with qualifying interest generally subject to a 15% rate for residents under the applicable rules. KRA also explains that the payer is responsible for deducting and remitting withholding tax where applicable.
However, investors should be careful about assuming that the tax treatment of a Treasury bill and the return shown by a particular money market fund can be compared by simply subtracting 15% from every advertised figure.
The structure of the investment matters.
With an MMF, the fund itself has investments, expenses and tax considerations within its operations. What the investor sees as the fund’s yield or return should therefore be understood from the fund’s reporting and offering documents.
The practical lesson is simple:
Do not compare investments using gross numbers when what matters to you is what actually ends up in your pocket.
If you are investing a substantial amount, especially through a company or other legal structure, get current tax advice rather than relying on a general internet calculation.
Tax rules can change, and investment decisions should be based on the rules that apply when you make the investment.
So, which one gives you the better return?
There is no permanent winner.
That answer may sound unsatisfying, especially when you are looking for a simple comparison.
But investment returns move with interest rates and market conditions.
CBK’s current Treasury bill rates illustrate this clearly. The latest published figures show rates below the levels many investors may remember from previous periods.
Money market fund yields also move because the funds invest in interest-bearing instruments whose returns change over time.
Therefore, someone who tells you, “T-Bills always pay more,” is oversimplifying.
So is someone who says, “MMFs always pay more.”
A better comparison is to look at the net return, risk, liquidity, fees and time period for the particular investment you are considering.
Suppose one investment earns slightly more but locks your money away when you might need it.
The extra return may not compensate for the inconvenience.
On the other hand, suppose you have money that you absolutely do not need for 364 days and are comfortable holding a government security directly.
In that situation, the predictability of a Treasury bill may be more valuable to you than the flexibility of an MMF.
The higher number is not always the better investment.
The mistake of putting every shilling into one place
Peter eventually realised that he did not actually have one financial goal.
He had several.
Some of the money was his emergency reserve.
Some was intended for the land deposit.
Some was simply money he was accumulating because he wanted to become financially stronger.
Putting all KSh 180,000 into one investment would have forced one product to solve three different problems.
He did not need that.
He could keep the money needed for emergencies in a liquid investment.
He could consider putting the amount meant for the land deposit into a Treasury bill whose maturity fits the expected payment date.
And he could continue building his longer-term investments separately.
This is what a portfolio should do.
It should not simply contain different products.
The investments should have different jobs.
One investment can provide liquidity.
Another can provide predictable income.
Another can provide long-term growth.
Once you think this way, Treasury bills and money market funds stop looking like enemies competing for the same money.
They become tools you can use for different purposes.
When a Treasury bill may make more sense
A Treasury bill may be worth considering when you have a lump sum that you know you can leave invested until maturity.
It can suit you if:
- You want direct exposure to a government security.
- You have a clearly defined investment period.
- You know when you are likely to need the money.
- You want to avoid managing a portfolio of individual short-term instruments yourself.
- You are comfortable with the money being committed for the chosen tenor.
- You have enough capital to meet the applicable minimum investment.
The most important part is the final point: you should be comfortable not touching the money before maturity.
If you are constantly thinking, “What if I need this next month?”, that money may not belong in a product whose strength is its defined maturity.
The latest CBK information confirms that Treasury bills are available in 91-day, 182-day and 364-day maturities, with a KSh 50,000 minimum investment.
So the decision should begin with your timeline, not the rate.
When a money market fund may make more sense
An MMF may be more appropriate when flexibility is important to you.
It can suit you if:
- You are building an emergency fund.
- You expect to add money regularly.
- You may need access to part of your savings.
- You want professional management.
- You want exposure to a portfolio of short-term investments rather than selecting securities yourself.
- You are starting with a relatively small amount.
It can also be useful for someone whose income is irregular.
A photographer, consultant, contractor or small-business owner may have months when KSh 50,000 comes in and other months when nothing comes in.
They may not want to commit every contribution to a fixed maturity.
An MMF can provide a place to keep building the reserve while retaining access according to the fund’s withdrawal terms.
But again, the word “fund” should not make you careless.
Check that the fund is authorised and understand its terms before investing. CMA publishes information on licensed collective investment schemes and fund managers.
Why you may not need to choose just one
There is a temptation to look at investing as a competition.
Treasury bills versus MMFs.
Shares versus property.
SACCO versus fixed deposit.
But your financial life does not have to choose only one winner.
You can use an MMF for money that needs to remain relatively accessible while putting another portion into Treasury bills when you have a clear period in which you will not need it.
For example, someone with KSh 300,000 could decide that the money is not one single pot.
They might keep part available for emergencies and short-term needs while investing another portion for a known future expense.
The exact allocation depends on the person’s circumstances, and there is no universal percentage that everyone should follow.
What matters is that the investment matches the purpose.
This approach also reduces the temptation to withdraw a long-term investment every time an unexpected expense appears.
Your emergency reserve does the job it was created to do.
Your investment with a defined maturity does its own job.
That is a much healthier way of thinking about a portfolio.
What Peter eventually understood
Peter did not need to find the investment that was “best” for everyone.
He needed to find the investment that was appropriate for his KSh 180,000.
That sounds like a small distinction, but it changes everything.
If he put emergency money into a fixed-term investment, he could find himself scrambling when an emergency came.
If he left all his savings in an ordinary account, he could miss the opportunity to earn a return.
If he chased the highest advertised yield without understanding the product, he could make a decision based on a number rather than the purpose of his money.
The better approach was to divide the problem.
Money he might need suddenly needed liquidity.
Money with a known future date could be matched to an appropriate Treasury bill maturity.
Money intended for longer-term wealth creation needed to be considered separately.
That is the lesson worth carrying away.
Do not ask an investment to do a job it was never designed to do.
Treasury Bills vs Money Market Funds: The decision in simple terms
| What matters to you | Treasury Bills | Money Market Funds |
| Government-backed security | Yes | Fund may invest in government securities among other instruments |
| Investment period | 91, 182 or 364 days | Generally ongoing |
| Minimum investment | KSh 50,000 under current CBK information | Depends on the fund |
| Professional management | No — you invest directly | Yes |
| Access before maturity/withdrawal | Less convenient | Generally more flexible, subject to fund terms |
| Return | Determined through the T-bill auction | Varies with the fund’s underlying investments |
| Best suited to | Money with a defined holding period | Money where flexibility and regular investing matter |
| Regulation | Issued through CBK | Collective investment schemes regulated by CMA |
The table should not be read as saying one product is safer in every respect than the other. The risks are different because the structures are different.
CBK describes Treasury bills as short-term government securities, while CMA describes collective investment schemes as pooled investments managed professionally on behalf of investors.
The question to ask before you invest
Before you move money from your bank account, M-Pesa wallet or business account into a Treasury bill or money market fund, stop and ask yourself one question:
“What will this money be needed for, and when?”
If the answer is, “I may need it at any time,” liquidity should carry significant weight.
If the answer is, “I know I won’t need it for six months,” a fixed-term government security becomes more interesting.
If the answer is, “I am building savings gradually and want professional management,” an MMF may be more convenient.
And if you have enough money to serve several purposes, there is no reason to force everything into one product.
The strongest portfolio is not necessarily the one with the highest advertised return.
It is the one that allows you to meet your obligations, handle surprises and steadily build wealth without repeatedly dismantling your investments.
That is what Peter eventually learned.
The KSh 180,000 was not just money.
It represented two years of saying no to unnecessary spending, setting aside something when things were tight and slowly getting his finances under control.
The investment decision therefore mattered.
But the bigger victory was understanding why he was investing in the first place.
Final Thought
Treasury bills and money market funds can both play useful roles in a Kenyan investment portfolio.
Treasury bills can make sense when you have money you can commit for a known period and want direct exposure to short-term government securities. Money market funds can make sense when you value liquidity, professional management and the ability to invest gradually.
Neither should be selected simply because someone says it is “the best.”
Your income, financial obligations, emergency needs, investment horizon and purpose for the money all matter.
And sometimes, the smartest answer is not Treasury bills or money market funds.
It is Treasury bills and money market funds, with each one doing a different job.
That is how investing starts becoming less about chasing returns and more about building a financial life that can withstand the unexpected.
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