You are losing money if your money is in a traditional savings account. The reason for this is inflation. Inflation decreases the purchasing power of your money.
Take a 70’s Mcdonald’s menu, for example. In the 1970’s, a Big Mac was 65 cents. Compare that with today’s Big Mac which is $3.99. That’s over six times more expensive! Another good example is the cost of a new car. Back in the 90’s it was about $15,000. Today, it’s $40,000 for that same new car.
Now, in the last 12 months, the government has printed 40 percent of all the currency that is in circulation today. That has even a bigger impact than inflation. The printing of money isn’t inherently negatively impactful on the economy when it’s in direct correlation with productivity, but because of what happened with Covid, the productivity went down and the printing increased.
Essentially, there’s more money in circulation going after the same amount of goods rather than the goods also rising with that amount of money. This has a negative impact on the power of the dollar. The inflation rate for the last year has been anywhere between 4.5% to 7.5% and that has a significant impact on your buying power.
So let’s take that 4.5% to 7.5% and choose a percentage somewhere in the middle making the rate of inflation 5.5%-6%. The national average interest rate for a savings account in the United States is .06% which is a 100th of the rate of inflation! That means while you have money sitting in the bank, you are losing anywhere from 4%-5% every single year!
With money in your savings account actually losing you money, you may be wondering what you can do to combat this. You need to be earning at least 5% interest on your money each year just to keep up with the rate of inflation. Basically, you need to find ways to have your money make you more money. Savings accounts, certificate deposits and money markets are not keeping up with the rate of inflation.
An alternative, passive investment, a high- yield crypto earning account does keep up with the rate of inflation and that’s where we’ve put a portion of our portfolio. What is involved with getting your money into a high-yield crypto earning account? We’ve made several videos for further education. Continue to watch our series to see how it’s done.