Chances are, of you’ve been saving for any period of time, you’ve noticed that savings account rates have been in the crapper lately. To say that the interest rates are low on savings accounts these days somehow doesn’t even seem to do it justice. In most cases, people are earning less than 1% interest on their hard earned money when they let it sit in the bank.
Those of us who lived through the ‘70s and ‘80s can remember double digit interest rates. Those were the days for savers. Savings account rates were phenomenal. Watching your interest compound was kind of like watching the numbers on the gas pump. Well, OK, maybe that’s a bit of an exaggeration, but compounding interest did have a way of making your bottom line grow quickly.
So, what can we do to bring back those days? Most are quick to point to the economy (and whichever political party they figure is to blame for it), but let’s not be so hasty. We’d all like to see a better return on your money, but I don’t think any of us really wants to return to the economic times when savings rates actually were high.
Remember the Carter years? Interest rates were high, sure, but so were inflation rates. In fact, inflation rates were even higher than savings account rates. What that meant was that even if you did save your money, your money was losing value so fast that you ended up with a net loss for not spending it when you got it.
Don’t get us wrong, there’s a tremendous value in saving money, even if it does lose value to inflation. The fact is that money is almost always going to lose value faster than it accumulates from interest. That’s just the way things work. If you want your money to keep pace with the rate of inflation, you need to take some calculated risks with it. It’s as simple as that.
We’re not advocating taking your nest egg to Vegas, or even putting it into high risk investments, but you might want to consider:
- CDs
- Safer mutual funds
- Government bonds
- High yield savings
- Precious metals
There are lots of options available for the person who wants their net worth to keep pace (or outpace) inflation, but putting it in a savings account will never achieve that.
You should have some liquid assets in a savings account, of course. But that money should serve as a hedge against emergencies, offering cash on hand. Once you have a few months’ worth of income saved, you’re much better off looking at other avenues for the rest of your savings.
