Am I actually losing money by trying to save?
Did you know that letting money sit in a traditional savings account year after year can actually be causing you to lose money? Many people do not take inflation rates into mind when they store their money in their traditional savings accounts with the intention to save and increase their wealth. How could I be losing money? This is due to a little thing called inflation. The term inflation refers to the general increase in prices and decrease it the value of money. The average rate of inflation is 3% per year, which means that for every $10k in your bank account you will actually be losing $300/year. To some people, losing $300 over the course of 1 year may not seem like a drastic enough loss to take the time to look into alternative saving plans, but if you multiply that by 20 years you are actually losing $6k just because you let your money sit in your bank account! In this post I will discuss multiple options that can help to reduce savings loss due to inflation and to help increase your wealth in the future.
Before we get started it is important to note that everyone should have money set aside in a “rainy day” fund. I would suggest always having about 6-8 months worth of expenses available in case of any unexpected emergencies – stock market crash, job loss, personal or family hardships. While I will talk about the importance of investing in this post, you should always be aware of the dangers of investing past your personal financial means without any funds to fall back on during a time of need.
The non-traditional ways of saving I will discuss below will either help to fight off inflation, help to grow your money year over year. The most important thing to remember is that no matter what the financial market will rise and fall, so it is important to invest and accumulate multiple streams of savings and financial growth for your future rather than just at this current moment.
Bank Accounts That Fight Off Inflation
High Yield savings accounts act as a protector against financial losses that occur due to the 2% inflation rate. Quite a few banks offer online accounts that are FDIC protected. These accounts allow you to transfer and withdraw money just like any other bank account, but make sure to read the fine print – different accounts may have different policies. For more information on the benefits of these accounts check out my post all about high yield bank accounts!
Fundrise Real Estate Investing
Fundrise is an up and coming crowdfunded real estate platform. The platform is geared toward every type of investor, even those without much starting capital, because they have lower investment minimums than most platforms of its kind. Fundrise will let users start investing with as little as $500 for the first 90 days as an introductory trial period. If you like the platform and decide to continue, the minimum investment terms start at $1000. Depending on the type of investment you are interested in, Fundrise offers short term, medium term, and long term options. In order to decide which is best for you, their website provides data on the historical returns of the last 5 years for each investment type. On average the return rate is about 10% each year. This is the best way to passively invest and get into real estate without the hassle of everything that comes with owning a rental property firsthand.
Stash Investing
Stash Investing offers a stock based investing option rather than the traditional bank account. Stash has pre-selected portfolios for different stock sectors like energy, large blue chip stocks, health, and even the cannabis industry. There is also an option to invest in individual companies alone, which may interest those who are
more advanced and stock market savvy. The return rates are dependent on the investments that are chosen and the market at the given time. One of the features that I find most helpful is the auto invest option. By setting up the auto invest plan of your choice, Stash will automatically take the designated amount of money from your bank account and directly invest it into the portfolios in your account on a weekly, bi-weekly, monthly, or quarterly basis. This will guarantee and increase in savings, as it is much more difficult to transfer money out of your investments rather than you checking or savings accounts.