If Money Is Your Only Savings Strategy, You Are Losing Money.
Investing is not as difficult (or as risky) as it sounds, but it’s a lot of information and it takes time to study it, which generally turns off many people. However, if you’ve been putting it off and have a hefty amount of savings, think about the issue of inflation .
According to a BlackRock poll , 58% of Americans keep their assets in cash, and all that cash is subject to inflation. And, as Quartz points out , inflation is not your friend.
Now, if you have a spare fund or a little savings, this tip is probably not for you . It is good to have a reasonable amount of cash (that is, readily available) in case of an emergency. However, if your long-term savings strategy is to stash cash in traditional savings accounts or in the money market account, where it brings in 1% per annum (maximum), you can also stuff money under your mattress.
Our current inflation rate is 1.9 percent, and since 1914 it has averaged 3.28 percent. This means that the money you hold in your account with an interest rate of 1% will lose value over time. It probably doesn’t seem like a big difference now, but staying that way after retirement means losing a lot of growth. You will have to save even harder and longer.
If you want to do the math yourself, check out the Bankrate Inflation Calculator. You can enter your own numbers and compare how much your savings will be worth with and without inflation.
Investing is not only intimidating, but it can also be intimidating because any investment comes with a certain amount of risk. It’s hard to “let go” of this money! However, if you do it right , investing is not as risky as you think. This is also necessary if you want to offset inflation.