Graham Stephens says households are ‘losing’ inflation by doing this one thing

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Keeping large amounts of money in your checking account can be expensive.

Key Point

• The average American household saves $10,000.
• Keeping deposits in a checking account is a negative investment when inflation is taken into account.
• Some other investment vehicles give better returns than most checking accounts.

We all want a solid return on any investment. However, not all investment vehicles offer the same value. According to real estate agent and investor Graham Stephens, the average American household says he has $10,000 worth of savings, but keeping money in a checking account could beat inflation. . One of Stefan’s recent tweets claimed, “With just a 3% return each year, you can double that amount in 25 years!”

If you’re looking for a place to deposit your savings or invest for short-term or long-term gains, there are some excellent options. Let’s take a look at some of the best investment options for savings, according to Graham Stephens.

start an emergency fund

Emergencies are one component of sound financial planning. Think of your emergency fund as an insurance policy that protects you in the event (and if) unexpected expenses do occur. By putting money into an emergency fund, you won’t have to rely on your daily funds or withdraw money from other investments to cover costs when disaster strikes.

Emergencies that justify the use of funds include:

• medical or dental emergencies
• home repair
• car repair
• loss of income
• financial emergency
• unscheduled travel expenses

You should keep an emergency fund in a savings account separate from your daily expenses. Keeping your money in a high yield or money market account allows you to earn money at competitive rates while keeping it pristine.

short term goal fund

You should also set aside money in a separate account for short-term financial goals. Reach your goals faster when you set aside money for specific goals, such as saving for your next vacation, down payment for a house, buying a car, financing your next wedding, or any other life goal. It is useful for

It also means you don’t have to borrow money from your current investments to fund your future plans.

repay high interest debt

If you’re taking on debt every month, you’re probably losing money because of high interest rates. Not all debt is necessarily bad. Having a mortgage can be a plus, it also gives you a place to live. However, if you have credit card or other high-interest debt, it’s a good idea to pay off the balance as soon as possible. It’s a great return!”

One option that can help you pay off your debt faster and save you money is to apply for a balance transfer card. A balance transfer credit card allows you to transfer your existing credit card or other eligible debt balances to a new card. In many cases, the APR implementation period is 0%.

Balance transfer offers allow you to pay off your debts over time without interest. Please note that many balance transfer cards charge a fee. Make sure the fees are worth moving the balance and you will be charged less than the interest on the original balance.

retirement account

Investing in a retirement account opens the door to higher earning potential thanks to compound interest.

If your employer provides a 401(k), the amount you invest in it will be deducted from your taxable income. If they offer employer matching, take advantage of it. It’s essentially free money to help boost your retirement account faster.

Other retirement account options include traditional IRAs and Roth IRAs. Under the Roth IRA, donations are not tax deductible, but all earnings are tax exempt.

index fund

Index funds aren’t necessarily an attractive option to invest in, but they do get the job done, especially if you build up over time. Investing in an index fund, Stephan said, “reinvests dividends and allows him to earn eight to 10 times more in a year.”

Instead of investing in the stock of a single company, index funds allow you to own hundreds of stocks or bonds based on an index they track. For example, the S&P 500 Index follows the performance of hundreds of companies in the S&P 500.

Index funds are considered low-risk investments because they are not dependent on the performance of one or two companies. It is also a low-cost investment option as it has a lower expense ratio than many actively managed funds.

Individual stock

You can also invest in individual stocks. There’s more risk here, but choosing the right stocks can pay off huge payouts.Unlike index funds, profits depend on the performance of a single company.

If you choose to invest in individual stocks, please do so with caution and understand that it may result in loss. Individual stocks should not dominate your investment or retirement strategy.

Cryptocurrency

Another risky but perhaps rewarding investment strategy is cryptocurrencies. Cryptocurrencies are digital currencies. It does not depend on central banks like other investments. Instead, it relies on blockchain, a publicly distributed digital ledger.

With thousands of cryptocurrencies to choose from, the chances of picking the next big coin are slim to none. When investing in crypto, Stephan suggests “in $BTC and $ETH, or DCA strategies he invests 50/50…”.

what is the best option?

Choosing the right investment vehicle for your savings depends on your financial situation and overall goals. If you don’t already have an emergency fund, start there and then spread out when you have enough money. Each option above has its own risks and rewards. Instead of collecting dust in your checking account, find the one that best suits your needs and start earning with your savings.