10 Apr When Is Saving Money a Bad Idea?
Throughout your life, you’ve no doubt heard about the conventional wisdom that comes with saving money. Saving money helps you build towards larger goals, such as buying a car, a home, traveling, and doing a variety of other desirable things. However, despite this fact, we’re here to tell you that the conventional wisdom can sometimes be wrong. Indeed, there comes a point where saving money, in terms of putting it in a savings account, is a financially horrible decision. There are a handful of reasons why this is the case…
Your money should be working for you
We’ve all heard the old adage that you need to spend money to make money. Well, once your savings are past a certain point, you should stop shoving your money away into a savings account and actually get it out there making you money. The idea is to have your money work for you through diversified investments. Too many people think of investing as something that is only for the rich, but this isn’t the case. There are plenty of low risk investments that you can start getting into with as little as $1.
Saved money is a missed opportunity
When you put your money into a savings account, you are essentially relegating it to a stationary position. With interest rates on savings accounts so low, that money is essentially sitting around being chipped away at by inflation. By saving money, you are actually making that money worth less, over time. In addition to that, you have to consider the opportunity cost of saving that money, versus investing it. By not investing, you are missing out on the possible gains that those investments might yield.
Have a limit to your savings
The point of this isn’t to say that all savings are a bad idea. Quite the contrary, actually. The point is that you shouldn’t treat saving money as your only financially beneficial move. Your savings account should have a goal. For many people, this means saving up what they need for emergencies, or maybe enough to cover their costs for a month or two. Beyond that, though, saving money can become extraneous, and has all of the negative aspects listed above.