There’s more to saving money than cutting your spending habits. You also have to decide how you’re going to store your savings. Keeping your savings sitting in a chequing account means you’re slowly losing value to inflation. The 2018 inflation rate in the U.S. was 1.9%, meaning that for every $1,000 you had saved, you lost $19 of purchasing power.
You have to do something to keep your hard-earned savings from losing value. Here are some of the options you can consider:
#1 Open a High-Interest Savings Account
If you want cash in hand just for emergencies, open a high-interest savings account that rewards you for keeping your money in the bank. You may need to open an account with a new bank to find the best interest rate.
A high-interest savings account may be the best place to put your emergency fund, or at least part of it, but that depends on the interest rate you can get and the inflation rate of the day. The size of your emergency fund should be determined based on your financial circumstances. Some experts suggest keeping 3-6 months’ living expenses, but that size may be too large, especially for young people who don’t have any significant investments yet. You should factor in costs such as home repairs or car breakdowns based on your actual lifestyle. If you live in an older home or drive a used car, you should prepare for those expenses.
#2 Buy Silver and Gold
Silver prices and gold prices are known to be inflation-proof. If you’re about keeping investments that you can quickly turn into cash during an emergency, silver and gold are considered very liquid assets, i.e., they do not take long to sell when you want the cash. There is always a market for gold and silver, whereas equities can be a tough sell during a market crash.
You can easily get fair value for bullion silver coins and gold coins at market prices – but not jewelry or other watches where you’re also paying for brand name and design. Stick to pure gold coins. You can click here to learn more about how to buy gold and what kind of gold coins and silver coins you should own to protect your money from inflation.
#3 Invest in a Retirement Plan
A retirement plan will not be as liquid as either a savings account or gold. There may be penalties for taking out money before you retire, although you may also be able to use those funds to invest in a down payment for your house. However, it is the most effective way to increase your retirement savings and advisable for anyone just starting to invest in equities and mutual funds. It’s a great way to grow your long-term savings and turn every dollar you save into more.
You can also buy gold as part of your IRA, an individual retirement account that’s becoming increasingly common as opposed to a 401(k) which your employer contributes to.
You work hard to save money. It takes self-discipline and sacrifice. You shouldn’t let your savings lose value due to inflation when there are so many strategies to earn with your savings.
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