Скачать или смотреть Savings Accounts Are LOSING You Money | Here's Why

Did you know your savings account could be losing you money? In this video I'll talk about why, what to do instead and exceptions for using a savings account.

#SavingsAccount #InterestAccount #Investing

The most common savings accounts offer an interest rate of 0.01%. Better than nothing right? Nope! One word, inflation. The cost of a movie ticket has increased over 15% in the last 10 years. That's a simple example of inflation. The average annual inflation in the United States, based on the last 10 years, is about 1.9%. This year in 2021, it's almost 6% (thanks covid / U.S. government).

Imagine you have $1000 in your savings account that pays you 0.01% interest. After one year, that $1000 will only have the buying power of about $982 (accounting for the 0.01% interest). After 5 years, the buying power will decrease to about $911. Yes, the dollar amount of your savings account will slightly increase, but the buying power will significantly (compared to the 0.01% interest) decrease over time.

Here's what I would do instead. Any long term savings should almost ALWAYS be invested. The first investment I would make is in retirement. A Roth IRA or 401k is a great place to start, especially if your employer matches 401k contributions. If you already invest in you retirement good for you!

The next investment I would make, is in an ETF or index fund. The S&P 500 is a common index fund, which is just a collection of 500 publicly traded companies. The S&P 500 has an average yearly return of about 10%, not including inflation. That's over 9000% more than the 0.01% interest generated from a savings account.

There are some exceptions for using savings accounts. The first exception is for your emergency fund. You should ideally have 6 months worth of living expenses tucked away for emergencies. I realize that in the United States, about 40% of individuals can't afford an unexpected $500 expense. If you can do it, great, if not, do the best you can. Your emergency fund needs to be easily accessible, making investments like ETFs and index funds a bad option. It can take time to pull your money out and if the market is down, you could lose money. I keep my emergency fund in my Robinhood checking account which used to pay 3% interest before the pandemic, but now pays 0.3%.

Another exception for using savings accounts is for short term savings. For example, imagine you are saving money for a car repair. It doesn't make sense to invest that money, because you'll most likely need it in fairly soon.

Once you do save up enough money, be sure to watch my video on how I earn free money using a credit card (hint: use the credit card and pay it off right away with the money you just saved).

Sources:
https://bankrate.com/banking/savings/...
https://investopedia.com/articles/inv...
https://statista.com/statistics/24498...
https://investopedia.com/terms/i/infl...
https://investopedia.com/ask/answers/...
https://cnbc.com/2019/07/20/heres-why...

*** This video is for entertainment purposes only and should NOT be misconstrued for financial advice. Please engage with a licensed financial advisor before investing your time and money. The links above may include affiliate commission or referrals, which I may generate revenue from.