There’s a tension in every personal finance decision, the quiet tug-of-war between wanting access to your money (liquidity) and wanting it to grow (returns). You might want to invest more or save aggressively, but can you afford to wait for that money to grow?
At the core of this is a simple truth: the less liquid an investment is, the more return you usually expect. But life isn’t always as predictable. Sometimes, you need your money today. And that’s where most people get stuck.
Also read: How to Set Financial Boundaries with Friends and Family
Many people either keep all their money in easily accessible but low-yield accounts OR they chase high-return investments that are difficult to exit.
Neither extreme is ideal. The real power comes from finding your own balance.
One useful approach is to assign money to timeframes:
- Short-term money (0–1 year): This is your liquidity layer. It looks like your emergency fund, and lives in your money market funds or a SACCO saving. It earns modest returns but is easy to access.
- Medium-term money: This can afford to grow a little. You can explore index funds, fixed income funds, or SACCO shares, still relatively stable, but with better returns.
- Long-term money: This is where growth matters more than access. Shares, equity funds, real estate, and even alternative assets can sit here, because you won’t need them soon.
When you match your money to time instead of chasing returns blindly, you avoid the trap of having all your funds tied up or all your money doing nothing.
Take a parent saving for school fees due in January. If they put that money into land in June, they might get a good deal, but unless they can resell or borrow against it in time, it becomes a crisis come January. On the flip side, if they leave it in a current account for 6 months, they earn nothing.
The parent should turn to a money market fund or bond fund offering growth, some flexibility, and peace of mind.
Your financial decisions don’t have to be on polar ends like “maximize returns” or “play it safe.” Sometimes, the smartest move is to stay liquid in the short term so you can stay invested long term. That’s what many portfolios miss a layer that allows you to wait out volatility, emergencies, or opportunities.
Remembering to design for real life is what keeps your finances resilient.
