I Have Money Saved for Safety – Now What?
There only a couple of reasons to keep our money in a low-interest savings account, one, to have immediate access to your money when unexpected circumstances arrive, and two, having it parked while you wait for quality investment opportunities to put you capital to work.
Now the first one is obvious and what we talk about all the time on Savings Toolbox, offering numerous encouragements and strategies of how to be sure you’ve got that safety account ready to protect you when you need it.
The problem with many people at that point is they tend to keep filling up these savings accounts with money because they aren’t sure what to do next.
Well, once you have reached your savings goal for the purpose of having a safe financial cushion to work with, at that time it is important to move out of the safety mentality into an investment mentality.
It’s a perfectly good strategy to have your safety money in a low-interest bearing account because it’s purpose is to buy you time when unexpected financial emergencies arrive; it’s purpose isn’t to build you wealth with solid returns, but to protect your wealth in times of trouble, by not forcing you to tap your important investment money.
The biggest challenge once you have you money set aside is to change from a safety mindset to a wealth-building mindset. Neither one is right or wrong, they just need to be applied in the right circumstances.
Probably the biggest reason we keep funds in low-interest accounts is they’re the simplest and most easy to understand, the most safe, and we tend not to want to change what we’re doing, as familiarity becomes a friend we don’t want to abandon.
The point of this article isn’t to come up with investment ideas concerning what to do with your money once you have a financial cushion, rather it’s to help you move out of one mindset into another, so you will start to break out of your pattern and into a new one.
Once you reach you savings goal there’s no reason in the world to continue adding to it. The major reason for that is because inflation will eat away at its buying power and you’ll never build wealth with tiny interest rates.
This doesn’t mean to panic and move your money for the sake of moving it, what it means is sit on that money available for investment with an eye toward waiting for the right deal to come along. Once it does, then pounce on it.
Savings accounts aren’t ends in themselves, they should only be a holding place for money waiting for good opportunities to come along. Excluding your money set aside for crises, there should be no other purpose for putting and holding money in a savings account other than for the purpose of investing it at opportune times.
Tags: financial management, money management, saving strategies
