I have a pet peeve… And yes, I know that doesn’t make me special. You probably have a few yourself. Mine has to do with the financial mis-information that is perpetually spouted by main stream media and their ilk.
I continue to see articles and broadcasts that promote saving money as an actual way of solidifying retirement nest eggs for those of us hoping to retire one day. This is absolute lunacy! Again, I refer you to my headline “Just owning the Renminbi is better than a savings account!” What do I mean by that?
Let’s see average savings rates at the time of this writing are listed below courtesy of bankrate.com:
Let’s see average savings rates at the time of this writing are 0.69% according to of bankrate.com!
So there is is. An average interest rate on savings and checking of 0.69%… They are telling you, in fact screaming at you, PUT YOUR MONEY ELSEWEHERE! The Chinese Renminbi, for example, appreciated against the dollar more than 4% in the last week!
Do any of you think that saving money at this rate will get you anywhere? I hope not. Those of you who answered “No!’ go to the head of the class. The government’s own “doctored up” inflation numbers tell us this. They advertise inflation at 3% – 4% which is a complete understatement of the real number.
However, even if we use the government’s number we still have a net loss in purchasing power with the cash we have set aside if it only grows at 0.69%. That’s just simple math.
Think differently: Its not how much money you have when you retire; its how much purchasing power will you have when you retire!
In an inflationary environment, protecting your purchasing power is of utmost importance. If you have $1,000,000 dollars when you retire 20 years from now, but it only buys you $100,000 worth of goods and services because inflation has eaten away it’s value then you have a serious problem.
That is the problem we face moving forward. In today’s inflationary environment “savers are losers”… Its time to look at the returns you are getting and look at inflation rates both real and imaginary (the governments inflation) and decide on an effective course.
The truth is your financial planner, your 401k manager, and your investment adviser probably have bigger fish than you and will devote more time and energy to others because the commission is higher. You have to educate yourself and take an active roll in what you want to create.
Personally, I own foreign stocks, foreign currency, and inflation protected assets like real estate. How about you? How is that savings account working for you?
