Money words, decoded

Every term here is one you will meet on a payslip, a SACCO statement, a loan offer or in this app. Each ends with why it matters — because the reason jargon costs people money is not that they cannot define it, but that they do not know which number it quietly changes.

Pay & tax

Gross vs net: Gross is what your employer says they pay you. Net is what reaches your account after PAYE, NSSF, SHA and the housing levy.; Why it matters. Almost every quoted figure in Kenyan finance is gross, and almost every figure you can actually spend is net. Comparing one to the other is the single most common money mistake there is — it is why a job offer can be larger and leave you poorer.; Open the Take-home Pay Calculator →
PAYE: Pay As You Earn — income tax your employer deducts before paying you, charged in bands that rise with income.; Why it matters. It is charged on the band, not the whole salary: a raise that pushes you into a higher band taxes only the part above the threshold, not everything. People turn down money believing otherwise.; Open the Take-home Pay Calculator →
Personal relief: A fixed monthly amount subtracted from your PAYE bill, not from your income.; Why it matters. Because it comes off the tax rather than the pay, it is worth the same shillings to everyone — which makes it proportionally far more valuable at a low salary than a high one.; Open the Take-home Pay Calculator →
NSSF Tier I and Tier II: Two layers of the National Social Security Fund contribution. Tier I applies to the lower band of pensionable pay, Tier II to the band above it.; Why it matters. Tier II can be contracted out to an approved private scheme. Readers who do not know the two layers are separate cannot tell whether their employer has done so, or what happened to that money.; Open the Take-home Pay Calculator →
Housing levy: A statutory deduction of 1.5% of gross pay, matched by the employer, under the Affordable Housing Act.; Why it matters. It is deducted before you see your pay and reduces the net figure every other calculation should be built on — including how much loan you can genuinely service.; Open the Take-home Pay Calculator →

Borrowing

APR (annual percentage rate): The annual cost of borrowing, expressed as a percentage of the amount borrowed.; Why it matters. A daily fee is an enormous APR. Fuliza's roughly 1.083% a day is about 400% a year, and a lender quoting the daily figure is not lying — they are relying on you not annualising it.; Open the True Cost of Fuliza Calculator →
Flat rate vs reducing balance: A flat rate charges interest on the ORIGINAL amount for the whole term. Reducing balance charges it on what you still owe.; Why it matters. A 12% flat rate is roughly a 22% reducing-balance rate on a typical term — nearly double. Kenyan lenders quote both, and the flat one always looks cheaper because it is designed to.; Open the Loan / HELB Repayment Calculator →
The one-third rule: A statutory limit: your total loan deductions may not leave you with less than one third of your gross pay.; Why it matters. It is a floor on what survives your deductions, not a target to fill. Borrowing up to the limit is legal and generally ruinous — the rule exists to stop lenders, not to guide you.; Open the 1/3 Rule Checker →
Guaranteeing a loan: Pledging your own SACCO savings as security for somebody else's borrowing.; Why it matters. The pledged amount stops being yours to borrow against, even though it still shows in your balance. People discover their own loan was refused because of a guarantee they had forgotten giving.; Open the Sacco Guarantor Liability Shield →

Saving & investing

Withholding tax (WHT): Tax deducted at source from investment income before it reaches you — 15% on most interest, 5% on SACCO dividends, 0% on infrastructure bonds.; Why it matters. Every advertised investment yield in Kenya is quoted BEFORE this. An 11.5% money market fund pays about 9.8%. Comparing an advertised MMF rate to an after-tax rate is comparing two different things and choosing wrong.; Open the Investment Returns Calculator →
Taxable vs tax-free income: Some income is taxed at source, some is exempt. Infrastructure bond interest is exempt; bank, MMF and ordinary bond interest is not.; Why it matters. A tax-free 12.8% beats a taxable 14% once 15% withholding tax is applied. The headline ranking and the real ranking are different, and only the real one pays for anything.
Compound interest: Interest earned on interest already earned, rather than only on what you put in.; Why it matters. It is why starting ten years earlier beats saving twice as much later, and why a debt left to roll grows faster than it feels like it should. Nearly every result in this app is compounding pointed in one direction or the other.; Open the Investment Returns Calculator →
Money market fund (MMF): A pooled fund investing in short-term government and bank paper, quoted as an annualised yield and usually available at T+1.; Why it matters. The advertised yield is gross, daily-accrued and variable — three qualifications at once. It is the most useful default home for short-term money in Kenya, and the least accurately compared.; Open the SACCO vs Bank Loan Comparison →
SACCO dividend vs interest on deposits: SACCOs pay a dividend on share capital and interest on deposits. They are different pools with different rates and different rules.; Why it matters. A headline '15% dividend' may apply only to shares, which are often a small part of what you hold and are not withdrawable on demand. Applying it to your whole balance overstates the return substantially.; Open the SACCO vs Bank Loan Comparison →
Treasury bill discount rate: How CBK quotes a T-bill. You pay less than the face value and are repaid the face value; the quoted rate describes that discount.; Why it matters. It is NOT the return. The discount is earned on the smaller amount you actually paid, so the true gross yield is higher — and 15% withholding tax then pulls the net below the quote. Multiplying your capital by the quoted rate is wrong twice, in opposite directions.; Open the DhowCSD T-Bill Ladder →
Effective annual yield (EAY): What an investment actually returns over a year once the timing of the payments is accounted for.; Why it matters. Two products quoting the same headline rate can pay different EAYs depending on how often they pay out. EAY is the number that lets you compare them; the headline rate is the number that lets them be compared favourably.; Open the DhowCSD T-Bill Ladder →
Nominal vs real return: Nominal is the growth in shillings. Real is the growth in what those shillings buy, after inflation.; Why it matters. A 9% return with 6.4% inflation is about 2.4% real — you are roughly a quarter as much better off as the headline suggests. Money in an account paying below inflation is shrinking while the balance rises.; Open the Inflation Reality Calculator →
Inflation (CPI): The rate at which the general price level rises, measured by the Consumer Price Index.; Why it matters. It is the hurdle every investment has to clear before it has done anything at all. It is also an average across a basket — your own inflation depends on what you actually buy, and school fees and medical care have historically run well above it.; Open the Inflation Reality Calculator →
Emergency fund: Money held in an instantly accessible form to cover a shock, usually 3–6 months of expenses.; Why it matters. Its job is availability, not return. Chasing yield with it converts an emergency fund into an investment that will be sold at the worst possible moment — which is what an emergency is.; Open the Money Runway Calculator →
Chama / merry-go-round: A rotating savings group: everyone contributes monthly, one member takes the pot each month until all have had a turn.; Why it matters. In pure cash every member ends identically — the pot is the same and everyone pays every month. What differs is TIMING: going first is an interest-free loan from the group, going last is an interest-free loan to it. That gap is what the group is really allocating when it picks the order.; Open the Chama / Group Savings Optimizer →

Health & retirement

SHA (Social Health Authority): Kenya's statutory health financier since October 2024, replacing NHIF. Salaried members contribute 2.75% of gross pay, with a monthly floor.; Why it matters. It is a floor, not a plan. Cover is built around accredited public facilities, so a household expecting private hospitals needs a separate top-up. Assuming SHA covers your existing care is the mistake, not the contribution rate.; Open the SHA Health Coverage Gap →
Private medical top-up: Insurance bought alongside SHA to reach private facilities and services SHA excludes.; Why it matters. Premiums are banded by age and climb steeply, and Kenyan insurers commonly decline NEW members past their mid-sixties — admitting older people only on continuous membership. The decision therefore expires before retirement does.; Open the FIRE Number Calculator →
Safe withdrawal rate: The share of a retirement pot you can spend each year without exhausting it — the origin of the familiar 4% and 25× rules.; Why it matters. Those rules come from American market history and size a pot meant to last forever. Applied unchanged to Kenya they mislead in both directions at once: they ignore that spending falls in real terms here too, and that medical cover climbs steeply while everything else falls.; Open the FIRE Number Calculator →
FIRE: Financial Independence, Retire Early — holding enough capital that investment income covers your living costs.; Why it matters. The number is not one multiple of today's spending, because retirement spending is not one flat line. Ordinary costs drift down in real terms while medical care climbs; the honest answer prices those two streams separately.; Open the FIRE Number Calculator →

24 terms. Missing one you met somewhere? It probably belongs here — the test for inclusion is whether misunderstanding it costs money. See also the questions page and the calculators.