Buzz
Investing may not be as difficult or risky as it seems. It’s just a lot of information to absorb, and the time investment needed can deter many people from getting started. But if you've been avoiding it and have substantial savings in cash, it’s time to think about the impact of inflation.
A BlackRock survey reveals that 58% of Americans keep their wealth in cash, but all that cash is vulnerable to inflation. As Quartz highlights, inflation works against you.
If you’re holding a small emergency fund or modest savings, this advice may not apply to you. Having accessible cash for emergencies is wise. However, if you’re relying on cash as your long-term savings strategy, stashing it in a savings or money market account earning minimal interest (1% or less), it’s practically the same as hiding it under your mattress.
With the current inflation rate at 1.9% and an average of 3.28% since 1914, the money in your 1% interest account is losing value over time. It might not seem significant now, but if you continue this path until retirement, the lack of growth could cost you dearly. You'll end up needing to save much more for a longer time to make up for it.
If you prefer to do the math yourself, take a look at Bankrate’s inflation calculator. You can enter your own numbers to see how inflation will affect the value of your savings over time.
Investing can feel overwhelming and even frightening because of the inherent risks. It’s tough to part with your money! But, if you’re doing it the right way, investing isn't nearly as risky as it seems. Plus, it’s essential if you want to keep up with inflation.
