How Safe Is Your Cash?

Posted on Sep 14 2017 - 9:47am by Editorial Staff

The stock market is a very volatile investment strategy which turns some people off. The markets can change in the blink of an eye and suddenly, you’ll find that the value of your investment has dropped significantly. This danger is turning people away from the stock market and instead, they’re deciding to keep their money in cash because it’s believed to be safer. But is that really true? While you might think that cash is the safest way to keep your money, but that view is often spread through these myths about cash.

It Doesn’t Go Down In Value

The thinking behind this is, if you put $100 into the bank at an interest rate of 1%, you’ll get $101 the next year. That’s true, and there’s no way that your money can drop below $100 unless you spend some of it. But that’s only half the story because people forget about inflation. When you’re looking at the value of cash, you need to consider it in terms of the goods and services that your money can buy; in other words, its true value. So, using the same example, you have your $100 in the bank at 1% interest. You finish up the year with $101. However, if inflation was at 3% for the year, you would need $103 to buy the same amount of goods and services that would have cost you $100 the previous year. In real terms, the value of your cash has gone down. You might think it’s only a few dollars, but that’s just for the purposes of the example. If you’ve got thousands in the bank, you could start to see the value of your cash depreciate by hundreds if your interest rate doesn’t keep up with inflation.

It’s Easy To Grow

Your cash can go down in value quite easily, but it is far more difficult for it to increase in value by a decent amount. If you invest in commodities from somewhere like Lucius Precious Metals, you can see it increase drastically in price and watch your savings grow. When you’ve got cash in the bank, you will see a small increase from the interest so long as it outweighs inflation, but even then, it will only be a very small amount.

Spending

While you might be very good with your money, it’s always a likelihood that you’ll spend some of that money if you’ve got it in the bank. The more you spend, the less money you’ll be making on the interest and, try as you might, you’re probably going to spend at least a bit of it. When your money is tied up in stocks, you won’t have any of that temptation there and you’ll have to go through the process of selling before you can access any cash.

In the right economic climate, you might be able to see a significant return by holding your assets in cash form, but it’s very unlikely. It’s more likely that it will either stagnate or even depreciate in value if inflation is high. While there are more risks, if you really want to see your money grow, consider some other investment options that are far more lucrative.

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Editorial Staff

Editorial Staff at I2Mag is a team of subject experts led by Karan Chopra.