There Are ONLY 3 Reasons To Keep Money In Savings Accounts

There are really only 3 reasons to keep money in a checking/savings account: 

1. To satisfy your 6-month emergency reserve….rainy day funds should always be in cash.
2. You have large, planned expenditures (or opportunities) that will require large cash withdrawals in the next 2-3 years. 
3. Having "extra" cash lets you sleep at night….and this comfort will mean that you invest more aggressively with your other money. (There is not enough attention paid in finance to the concept of "sleep adjusted returns." 

That’s it.

Cash and it’s equivalents (CD’s, Money Markets, high yield savings) do not outpace inflation over time and so should never be categorized as an investment …they are just savings.   

And while saving money is important, you cannot “save” your way to financial freedom. 

You need compound interest working on your behalf (your money "making" money) to reach your full financial potential. 

Because "money", after all, is not the number of currency units (dollars) you see on a bank statement. Money, simply defined, means purchasing power: How many goods and services can you buy with the amount of money that you have? 

And cash is actively working to destroy your future purchasing power. $1,000,000 in cash today will lose 3% of it's value/purchasing power EVERY single year you leave it there (that's the historical average rate of inflation). In 30 years, that same $1,000,000 will be worth only $400,000 in real dollars...even if you still technically have $1,000,000, in the bank. 

(And by the way, the fact that high yield savings accounts are currently earning 5% does NOT make this a great long term investment when interest rates are around 7%. You are actually losing purchasing power in this exchange over time! Now, of course , a high yield savings account paying 5% can be an excellent place to store money for one of the three reasons above (if money needs to be kept in your "Now Bucket" you should at least be earning interest) but it's still not a viable path to long term compounding. 

So here's the question: Are you maximizing your "money", once properly defined?

I am available to speak over a 15 minute Right Fit call if you feel you could use some help navigating your financial situation.

Together, we can determine if our Financial Life Plan® process is the right fit for you.