Survey Says We're Keeping Too Much Money In Cash — Do This Instead

Shane Murphy  Wed, January 20, 2021

A survey says we're keeping too much money in cash — do this instead

Despite the economic calamity of the past year, a recent study says just over half the country has managed to squirrel away some cash since the first lockdown.  That’s encouraging news — however, almost 80% of savers are planning to keep their money liquid by leaving it in their checking or savings account, the Franklin Templeton-Gallup Economics of Recovery Study reveals.  While it’s always a smart idea to maintain a healthy emergency fund — experts suggest keeping enough cash on hand for three to six months worth of expenses — dumping all of your savings into a bank account is rarely the best move in the long run.

It’s tempting to play it as safe as possible right now, but your future needs will still be there once the pandemic is over. Here are some things to consider before you bury your savings in the bank.

Interest rates for traditional bank accounts stink

The biggest problem with leaving your savings in a checking or traditional savings account is that your money won’t have a chance to grow.  Traditional accounts pay practically nothing in interest; as of January 2021, the average interest rate for a checking account is 0.04%. Any meager earnings you see will be obliterated by inflation.

However, it’s not hard to find high-yield savings accounts that offer 10 times more interest — and provide the same ease of access you would have with a traditional account.  And if you’re willing to give up some liquidity on a portion of your savings, even for a few months, you may be able to earn even more interest with a certificate of deposit (CD).

CDs offer higher interest rates than most other savings options but lock your money away for a predetermined period. If you run into some unexpected trouble, you can pull out your cash early; however, you’ll have to pay a penalty that could wipe out a big chunk of your earnings.

Investing a chunk of your savings can pay off 

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https://finance.yahoo.com/news/americans-burying-savings-bank-could-150000131.html