Business Basics - 'Savings Accounts Cost You Money'
by Palyn Peterson

No joke. Savings accounts cost you money over the long term -- and no I do not mean membership fees.

Savings accounts are fantastic for dividing up money to save for short term projects. But, if you are saving for retirement, emergency funds, or saving just for the sake of saving, then do NOT keep that money in your regular savings account.

Here's why: inflation.

Inflation is usually 2.7% a year, but for all calculations, lets round it up to 3%.

The average savings account earns 1 to 2% per year -- but factor in inflation, and you are actually "earning" -1 to -2%!

You see, the number in your savings account will go up and up the longer it accrues interest, but its buying power falls and falls because inflation causes everything else to increase in price at a faster rate.

Dig?

So what you want to do put money in a mutual fund, or some other high interest account. I prefer mutual funds because they are relatively safe and have a relatively high interest rate.

The average mutual fund has an interest rate of 11%. Some more high risk ones can have rates as high as 16%. Factor in inflation and you are earning 8 to 13%. NOW you are earning money.

Just find a financial advisor to help you open an account and manage it. I personally suggest Edward Jones.

If you are saving for retirement specifically, open an IRA. You get special tax breaks with that.

Seriously consider this.