How to lose money every single day with your bank account

January 12th, 2005 - 1 Comment

Having a savings account at your bank is a good start. But did you know that you’re actually losing money by keeping your savings there?

Your savings account probably pays something like 0.25% interest. But did you know that inflation is over 3%? (Here’s the current inflation data.)

That means that over time, your savings-account return is actually losing you money! Yes, you’re earning some interest, but you’re losing in terms of real purchasing power.

This is like handing small amounts of money to a seemingly benevolent friend who is actually a manipulative crack dealer.

What can you do? Keep your savings account–it’s important. But move as much of your money as you can into investments that will earn for you. I’ve written about average return rates before:

0.25% – typical bank savings account
2.89% – 2-year CD
9.4% – average annual mutual-fund return (with survivorship bias factored in)
11% – average return of the market (remember index funds)

In other words, go invest in places that won’t lose you money. PLEASE!!!!

Now what?

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1 Comments

 

Comments

  1. Clarification to my previous post…I am referring to index funds, not the mutual funds that are actively managed. And I hsould also note that I dont have $10k to invest at the moment so Please keep that in mind in your response. Thanks a million! (pardon the pun) =p