Saving for school fees in Kenya usually comes down to three options: an education policy, a money market fund, or a SACCO. Each works, but they are very different, and picking the wrong one can cost you thousands of shillings over the years. In short: a money market fund is the most flexible, a SACCO can pay the highest returns (with a catch), and an education policy is the only one that also guarantees the fees if you die. This guide compares all three honestly so you can choose the best way of saving for school fees in Kenya for your family.
School fees are a long, predictable commitment, which makes them perfect for disciplined saving. The question is simply which vehicle grows your money best while fitting how you actually manage cash. Let us break down each option.
Table of Contents
Key takeaways
- For saving for school fees in Kenya, a money market fund is the most flexible and simple, paying around 7.6% to 10.5% net with easy access.
- A SACCO can pay the highest returns, with top dividends of 15% to 21% on share capital, but that share capital is not freely withdrawable.
- An education policy is the only option that also guarantees the fees are funded if the parent dies, but it carries high charges.
- For pure growth, a SACCO or fund usually beats an education policy, whose bundled insurance charges drag on returns.
- The smartest approach for many families is a fund or SACCO for growth, plus cheap term life cover for the protection.
Education policy vs MMF vs SACCO: at a glance
Here is the quick comparison for saving for school fees in Kenya.
| Option | Typical return | Access | Life cover? |
|---|---|---|---|
| Money market fund | ~7.6% avg, up to ~10.5% net | High (2-4 days) | No |
| SACCO | 15-21% dividend on shares; 8-12% deposit interest | Low on shares; moderate on deposits | No |
| Education policy | Modest (after charges) | Low (surrender penalties) | Yes |
Option 1: The money market fund
A money market fund is the simplest way of saving for school fees in Kenya. You deposit money, it earns a steady return, and you can withdraw within a few days. Top funds currently pay around 10% net, and even average ones beat a bank savings account comfortably. Minimums are low (often KSh 100 to KSh 2,500), and you can start and top up by M-Pesa.
Its strength is flexibility: your money is safe, stable and available when fees are due, with no lock-in. Its weakness is that it offers no life cover, so if you die, the saving simply stops. For most disciplined savers, though, a money market fund is the cleanest option. Compare the top payers in our guide to the best money market funds in Kenya and the current best performing money market funds.
Option 2: The SACCO
SACCOs are hugely popular for saving for school fees in Kenya, and for good reason: the returns can be excellent. Top SACCOs paid dividends of 15% to 21% on share capital in 2026, plus 8% to 12% interest on deposits, well above what funds or banks offer. You also gain access to loans, often up to three times your deposits, which many families use to smooth fees.
But there is an important catch. The high dividend rate applies to your share capital, which is generally non-withdrawable: you cannot simply take it out like a bank balance, and exiting usually means selling your shares to another member. Your deposits are more accessible but are often tied up as loan security. SACCO dividends also attract a 5% withholding tax. So a SACCO rewards long-term, committed saving rather than money you might need at short notice. SACCOs are regulated by SASRA, the Sacco Societies Regulatory Authority.
Option 3: The education policy
An education policy is the traditional route for saving for school fees in Kenya, and it does one thing the others cannot: it guarantees the fees are funded even if the parent dies during the term, cover that insurers under the Insurance Regulatory Authority provide. That protection is genuinely valuable. It also enforces disciplined saving through a fixed premium.
The downside is cost. A large share of your early premiums goes to charges and commissions rather than savings, so the growth on the savings portion is modest and surrendering early returns little. As a pure savings vehicle, an education policy usually trails a fund or SACCO. Its real edge is the built-in life cover. Our full guide to the education policy in Kenya breaks down exactly how it works.
Which pays more? A worked example
Numbers make the choice concrete. Say you save KSh 10,000 a month for ten years for school fees.
- In a money market fund at about 9% net, it could grow to well over KSh 1.9 million, with full flexibility.
- In a strong SACCO, the returns could be higher still on your share capital, but much of it stays locked in until you exit, and dividends vary year to year.
- In an education policy, the maturity value would likely be lower after charges, but the fees would be guaranteed if you died during the term.
The pattern is clear: for growth and access, the fund or SACCO wins; for protection, the education policy wins. That is the real trade-off in saving for school fees in Kenya, and it points to a smart combination rather than a single winner.
The smartest approach for most families
You do not have to choose just one. A widely recommended strategy for saving for school fees in Kenya is to separate growth from protection. Put your monthly savings into a money market fund or SACCO, where they grow efficiently and stay accessible, and buy a cheap term life policy separately to guarantee the fees if you die, the exact protection an education policy bundles in at a higher cost.
This “buy term and invest the difference” approach usually gives you more cover and more growth for the same money. To understand the protection side, read our guide to life assurance in Kenya. Whichever route you pick, starting early and saving consistently matters far more than the vehicle you choose.
How to choose the right option for your family
The best way of saving for school fees in Kenya depends on three questions about you, not on which product is objectively best. First, how much flexibility do you need? If there is any chance you will need the money at short notice, a money market fund wins, because a SACCO ties up your share capital and an education policy penalises early exit. Second, how disciplined are you? If you struggle to save unless it is locked away, a SACCO or an education policy enforces the habit better than an easily accessed fund.
Third, does anyone depend on your income? If yes, the protection an education policy or a separate term life policy provides is not optional, it is the whole point. Work through those three questions honestly and the right vehicle usually becomes obvious. And remember you can mix them: many families keep a fund for flexibility, a SACCO for higher long-term growth, and cheap term cover for protection, getting the best of all three while saving for school fees in Kenya.
Frequently asked questions
What is the best way of saving for school fees in Kenya?
There is no single best way; it depends on your priority. A money market fund is best for flexibility and simplicity, a SACCO for the highest returns if you can commit long term, and an education policy for guaranteed funding if the parent dies. Many families combine a fund or SACCO with cheap term cover.
Is a SACCO or money market fund better for school fees?
A SACCO can pay higher returns (15% to 21% dividends on shares) but that share capital is not freely withdrawable, so it suits long-term saving. A money market fund pays a bit less but gives you easy access within days. If you need flexibility, choose the fund; if you can lock money away, the SACCO may grow it faster.
Is an education policy a good way to save for school fees?
It offers discipline and, uniquely, guarantees the fees if the parent dies. But because of high charges, it usually grows your money more slowly than a fund or SACCO. It is best when you value the built-in life cover, not when your goal is purely to maximise savings.
How much should I save for school fees?
Work backwards from the expected fees and the number of years you have, then divide. Saving a fixed amount every month, and increasing it as your income grows, is the reliable way. Starting early makes the biggest difference because of compounding.
Can I combine these options?
Yes, and many people do. A common approach is to grow your savings in a money market fund or SACCO while holding a separate term life policy for protection. This usually beats relying on a single bundled education policy.
Disclaimer: The content on Sarafu is for educational and informational purposes only. It does not constitute financial, investment, or professional advice. Returns and rates mentioned are approximate, vary by provider, and were sourced at the time of writing (2026). Past performance is not a promise of future results. All investments carry risk; the value of your savings can go down as well as up. Always do your own research, verify current figures with the provider, and consider consulting a licensed financial advisor before making any decision.
