Should You Clear Debt First or Build Savings First?

In partnership with

When it all clicks.

Why does business news feel like it’s written for people who already get it?

Morning Brew changes that.

It’s a free newsletter that breaks down what’s going on in business, finance, and tech — clearly, quickly, and with enough personality to keep things interesting. The result? You don’t just skim headlines. You actually understand what’s going on.

Try it yourself and join over 4 million professionals reading daily.

Check it out

Greetings, and welcome to the 6th edition of the Wallet Wellness Newsletter in 2026 - your midweek source of practical financial tips to elevate your money management skills!

We hope you got a chance to read the last edition, where we discussed how to make a shift from payday desperation to payday strategy. This week, we shift gears to the dilemma of clearing debt first or building savings first.

As always, be sure to check out the Concept Corner below for a deep dive into the money concept of the week.

Let’s dive in!

MONEY254 TIP OF THE WEEK

Should You Clear Debt First or Build Savings First?

This is one of the most common financial dilemmas. You have debt. You have little or no savings. And your income cannot comfortably handle aggressively tackling both at the same time. So what should come first — clearing debt or building savings?

The answer depends on your financial position, but there is a logical order that works for most people.

The Case for Clearing Debt First

Debt, especially high-interest debt, quietly grows in the background. Loans often carry interest rates that compound quickly. If you are paying high interest, that cost grows faster than most savings accounts or low-risk investments can generate returns.

Eliminating that burden immediately improves your monthly cash flow and reduces financial pressure. There is a psychological benefit as well. Clearing debt creates momentum and gives a sense of forward movement. 

However, focusing entirely on debt without building any savings introduces another risk.

The Risk of Ignoring Savings

If you channel every extra shilling into clearing debt while maintaining zero savings, you remain financially exposed. Life is unpredictable. A medical emergency, unexpected repair, school-related expense, delayed income, or urgent family obligation can disrupt your plans.

Without even a small financial buffer, you are likely to borrow again when something unexpected happens. This creates a frustrating cycle where you clear debt only to accumulate new debt shortly afterwards. The progress you made disappears quickly.

Savings are not only about earning interest or building wealth. They are primarily about protection.

Ignoring savings may feel disciplined in the short term, but it can undermine long-term stability.

The Balanced Approach Most People Need

For most individuals, the smartest approach is not choosing one extreme over the other but sequencing both priorities properly.

The first step should be building a small emergency buffer. This does not mean accumulating several months of expenses immediately. It simply means creating enough cushion to absorb minor financial disruptions. Once you have this foundation, you reduce the risk of undoing your progress.

After establishing this initial safety net, the next focus should be on eliminating high-interest debt aggressively. By reducing or clearing expensive loans, you free up future income and stop losing money to interest charges. Once high-interest debt is under control, you can redirect that repayment money toward expanding your savings and investments. 

When Debt Should Definitely Come First

There are situations where clearing debt must be the priority. If the interest rate is extremely high and the balance is compounding rapidly, delaying repayment can significantly increase your financial burden.

When Savings Should Definitely Come First

There are also situations where building savings deserves immediate attention. If you have absolutely no emergency fund and your income is unstable, even minor disruptions can push you into new borrowing. If your debt carries relatively low interest and manageable repayments, creating a small buffer first may reduce your financial vulnerability.

Present Bias

Present bias is the tendency to prioritise immediate rewards over long-term benefits, even when delaying gratification would lead to better financial outcomes. In personal finance, it explains why people might splurge on a luxury today instead of saving for retirement, an emergency, or future investments. This bias often results in overspending, missed savings targets, or accumulating debt, as the short-term pleasure overshadows the long-term financial consequences. Read more

Money Tips & Career Advice

MONEY254 #MONEYTOK

How to Check Your NSSF Savings on M-Pesa & via USSD

For years, many Kenyans had to wait until the very end to know their NSSF balance.

Now, you can track your contributions and check your NSSF statement in real-time. It’s all about staying updated on your long-term planning without the stress.

Here is the simple way to view your NSSF via a shortcode or on your mobile phone wallet.

@money254hq

𝐇𝐨𝐰 𝐭𝐨 𝐂𝐡𝐞𝐜𝐤 𝐘𝐨𝐮𝐫 𝐍𝐒𝐒𝐅 𝐒𝐚𝐯𝐢𝐧𝐠𝐬 𝐨𝐧 𝐌-𝐏𝐞𝐬𝐚 & 𝐕𝐢𝐚 𝐔𝐒𝐒𝐃 For years, many Kenyans had to wait until the very end to know their NSSF balance. Now... See more

That's it for this edition of Wallet Wellness. We hope these financial tips have added some energy to your hustle. Stay tuned for more practical insights in our next edition of "Wallet Wellness" next week, and watch out for Money Weekly in your inbox this Friday.

Also, don’t forget to download the Money254 App on the Google Play Store, and remember that we can help you compare over 300 loans, savings accounts, current accounts, and more if you’re thinking about your next product.

Cheers to your wallet's well-being!

Money254 editorial team.