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3 Reasons NOT To Save Your Money

You should always save. Always. That’s common knowledge, right? That’s what our parents always said, anyway. It’s the hallmark of financial responsibility to save… Surely. Is this universally accepted truth as hard and fast as gravity or thermodynamics or is it an oversimplification that’s not quite so applicable in a financial climate that’s inherently complex? For baby boomers, the saving model worked. Their composite living costs took up a proportionate amount of their income, leaving them with enough disposable income to squirrel some away for a rainy day while still having enough ready cash to facilitate a decent quality of life.

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Unfortunately, the truths that baby boomers clinged to don’t hold true for millennials or even Gen-Xers. There are many reasons in today’s precarious financial climate why saving may not be the tried and true path to financial security that we assume it to be.

Let’s make one thing clear…

By not saving, we’re not saying that you should frivolously spend every penny of disposable income you may have (although there is a valid argument for enjoying your money while you have it). What we’re saying is that there are better things to do with your money and that saving needn’t be vaunted in the way that it is (especially by those who have to those who have not). Here’s why…

Because most savings accounts are terrible

Savings accounts can make a little money without presenting any risk… But it’s pretty negligible, especially if you want any access to it. Even generous savings accounts’ interest rates are pretty anemic, averaging at a measly 0.06%. Unless you’re lucky enough to have $10,000 to save, it’s unlikely that you’ll make enough in interest to have a meaningful effect on your finances. Plus, of course, the more you dip into your savings, the less interest you’ll gain.   

Because inflation!

Saving your money doesn’t insulate it from the ravages of inflation. With every year, inflation detracts more and more from the spending power of your money. If you’re lucky maybe your savings accounts’ interest rate will help to redress the balance. But at an average of 0.06%… Probably not!

Because investment beats saving every time… If you’re smart

If you’re laid off from work or if you’re injured in an accident, you’ll need to rely on other means to tide you over without facing a financial crisis. Contacting a personal injury attorney like may win you the restitution you need, but you’ll still need to keep the roof over your head throughout the court case. Unfortunately, it’s unlikely that you’ll be able to do this with savings.

If you invest, however, you’ll not only make money when your stocks rise, you’ll also receive a quarterly dividend payment that will be invaluable in lean times. Investments tend to make your money work way harder than savings so long as you can box clever.

Of course no investment is risk free, but having a diverse yet modest stock portfolio can help you find the balance between making money and insulating yourself from risk.