One of last weekend’s newspapers that made me think about you and indeed lots of Irish people like you. It pointed out that despite the fact that returns on deposit are so deplorably low – barely above 0% – people continue to save in these sorts of accounts rather than invest in the stock market, for example, where the returns are significantly higher.
Cash savings are costing you hundreds of thousands
It is a puzzle. Why do people continue to hoard surplus funds in something that offers close-to-zero rates of return with little prospect of improvement any time soon? The ECB is unlikely to raise interest rates for quite some time to come.
What does this mean for you? Since the crash, many of you have given equities a wide berth. Whether motivated by your own experience, advice you were given, or the uncertainty of a post-brexit-President-Trump world, you have steered away from investments that are perceived to be volatile.
Switching your assets into cash may have improved your heart condition, but it will not have done much for your ROI. When you consider the rates of return you could have earned from other asset classes, you start to get a picture of the wasted potential of your cash. Fortune magazine says that the S&P 500 index rose by 12% per annum during President Obama’s double term, which started in January 2009.
Time flies, especially when you are putting off financial decisions
The chances are you did not plan to leave so much of your money in low-interest savings accounts. Time seems to move even faster than normal when it comes to getting around to making big financial decisions. Life takes over. Years go by in the blink of an eye. It’s genuinely hard to find the time for you and your significant other to give proper headspace to your finances.
But what if I told you there is a way to invest that will increase the chances of your long-term financial health without leaving yourself destitute? Exchanging a negative real rate of return (when you take into account fees, inflation and taxation) for a reasonable return that could help you retire earlier, pay for your dream holiday in Nepal, or indeed pay for your children’s college education.
If you have significant amount of cash on deposit or in low-interest savings accounts, for your own sake, this July is the month in which you do something about it.