Here's What Could Happen If You Just Let Your Money Sit in a Savings Account

Core Insights - Keeping money in a savings account may provide comfort, but it can lead to a loss of purchasing power due to inflation and low interest rates [3][4] - The national average savings rate is currently at 0.40% APY, which is significantly lower than the inflation rate, resulting in a decrease in real value over time [3][6] Group 1: Savings Account Overview - Traditional savings accounts offer liquidity and FDIC insurance, protecting deposits up to $250,000 per depositor, per bank [5][9] - The opportunity cost of low-interest savings accounts is significant; for example, a $10,000 deposit at 0.50% yields only $50 in interest, while inflation could erode purchasing power by over $1,200 [6][8] Group 2: Pros and Cons of Savings Accounts - Pros: - Savings accounts preserve balance and provide psychological comfort [9] - FDIC insurance guarantees against losses [9] - Easy access and high liquidity [9] - Cons: - Savings accounts often do not keep pace with inflation, leading to value erosion [12] - Dormant accounts may incur fees and could eventually be closed, with funds handed over to the state [10][11] - Opportunity costs exist when compared to higher-yielding investments [12]