Monday Money Minute

You one minute money fundamental.

Monday, May 13th, 2024…..well, it’s Tuesday this time.

I know it’s been a while since we sent out a Monday Money Minute, but we are getting back into sending these out weekly. Please forward this to anyone you think would enjoy it.

High Interest Rates on Your Savings = Double-Edged Sword

We all love earning 4% and sometimes even 5% or more on our cash. however, this comes at a price.

People are getting high interest rates on their cash savings, but they are still losing money to inflation.

There are three things to keep in mind:

1) The bank will (should) always lend your money out at a higher rate than they pay you to put it with them.

Translation: Borrowing costs go up, this is why mortgage rates are 7.5% for a 30-year fixed-rate loan.

2) Any cash savings hold should have a specific purpose. The most common ones we see are emergency funds and saving for something you will buy in the next 12 months.

3) Having cash is great, but having too much can hurt you in the long term.

The point here is that if you have too much in cash, it will begin to cost you by eroding your purchasing power and you will miss out on profits when investments increase in value. We find some people hold on to too much cash as a matter of comfort…they know it’s not going to take a nose dive if the stock market goes down.