If You're Saving, You're Losing Money—Probably
By Jim Bauer
@porwest (112717)
United States
October 4, 2025 7:42am CST
When it comes to having a savings account, many people think this is enough, and many people believe they are actually earning on their money and growing it. But the reality is quite the opposite of that.
Let me explain.
The problem is twofold. It has to do with the average interest paid on a regular savings account and the current rate of inflation at any given time.
Right now, inflation stands at 2.9%. The average interest rate, according to the FDIC is 0.40%, or less than half a percent.
If you have $100 in your savings account, the following year the balance will rise to $100.40. On paper it appears you have made 40 cents. However, now we have to account for inflation which eats away at your spending power.
If inflation is 2.9%, the value of your $100.40 is only worth $97.56. Instead of gaining 40 cents, you lost $2.84.
What if you had $1,000 in that same savings account just to illustrate how much this makes a huge difference?
At the end of the year, you'd have $1,004.00, but your spending power of that would only be $975.58. You lost $28.42.
I mention this simply because more often than not, many people struggle financially simply because they do not understand money or how it works. It's the biggest killer of wealth, and the biggest killer of wealth opportunity. If you understand even the most basic of money concepts...
It's changes where you stand in the bigger picture.
In illustrations like this, what I like to pose to people is a question. Would you be willing to just hand someone $28.42 for absolutely nothing with nothing to show for it?
The answer is probably a loud "Hell, no."
Yet, when you put your money into a savings account, that is precisely what you are doing. And when you think of it that way, isn't that enough to think about how you could not only retain that $28.42, but actually make it worth more?
Really getting ahead is about keeping more of your money and finding ways to make what you keep actually work for you. Or, you can just keep pretending you're actually saving money while your money spends down quietly while it just sits there pretending to be doing something.
7 people like this
6 responses
@BACONSTRIPSXXX (18025)
• Torrington, Connecticut
8 Oct
I genuinely love your money post! You give good financial advise brother! Just opened my first ROTH IRA account, my 401k is looking decent but wanted to set something up aside from my employer etc
1 person likes this
@BACONSTRIPSXXX (18025)
• Torrington, Connecticut
10 Oct
@porwest Yeah iv been cutting down on unnecessary expenses and have my 401k at 12%, I do uber on the side as well and whatever I make doing that goes into my savings and end of month il send what I can to my Roth account
1 person likes this
@porwest (112717)
• United States
9 Oct
Glad someone gets something out of them. More often than not, unfortunately, most of this stuff falls on deaf ears.
Great on the Roth and the 401ks. I definitely encourage people to take advantage of those to the fullest extent they can. But I also caution people to not rely 100% on them—although, based on past conversations with you I am probably preaching to the choir...you already know this stuff—because you want to be able to retire when you have enough money, not when someone says "here is when you can do it."
For example, IRAs (although Roths and traditional work a bit differently) and 401ks have stiff penalties for early withdrawal before age 59 1/2. So, take me, had I not had other significant investments available to me to offer dividends and other sources of income, I would not have been able to retire at 50 because my money would be locked up.
IRAs and 401ks should be in addition to, rather than the only, source of future income to fund retirement. Right now my 401ks just sit there. My personal investments were designed to be my sole source of income in retirement, and now when I can cash those things out and start collecting social security, all these things will be icing on the cake.
I always did everything I could to ensure I was getting the best bang for my buck, every company match possible, and every tax advantage possible, but at the same time was fully committed to retiring when I wanted to, not when I was allowed to.
1 person likes this
@moffittjc (128824)
• Gainesville, Florida
4 Oct
It is something I have been well aware of for years. I keep just enough in a regular savings account to hold me over in an emergency for a week or two, until I can cash in some investments if need to in an emergency to cover expenses. But for the most part, I put my money into investments and accounts that are earning more than what the inflation rate is, so that I am not losing money over time. And I tend to invest aggressively, so I've been very blessed to have very high rates of returns that have beat inflation by a long shot.
1 person likes this
@porwest (112717)
• United States
4 Oct
I have been able to massively improve my returns through a series of "strategies." For example, it's not just dividends, but premiums earned from writing covered call options contracts, or the occasional shorting of a held stock that I know will only incur a short term dip. In that latter scenario I use the proceeds from the short sale to buy more shares on the way back up.
I know that my average yields tend to be in the 15%-25% range most of the time, but of course there are ALWAYS factors that can fudge the returns such as getting an options contract wrong and being called or miscalculating a stock going down for a short sale.
Granted, these are extremes most people wouldn't grasp. But the bottom line for me is that regardless of what methods one uses, the objective is to at least beat inflation to actually increase the value and spending power of any money you hold.
An emergency fund is an absolute essential.
This post was geared more toward those who ONLY use regular savings accounts to hold their entire savings. Here's an interesting bit of math—let's say one saved $100,000 and held it in a regular savings account assuming an annual dividend earnings rate of 0.40% and annual inflation of 3% (the 90 year average is 3.24% by the way). In 40 years the REAL value of that $100,000 will only be $33,370. By simply saving their money this way, they lose $66,630 worth of purchasing power. That figure should stagger anyone and jump them into action.
But that goes along with ANOTHER big problem when it comes to MOST people and their money. They aren't thinking of money in terms of tomorrow and they are ONLY thinking of their money in terms of what they see on their monthly statement.
Anyway, I'm rambling again, but I think the bottom line for me is that "the more one understands how money works, the less likely they are to have their money work against them"... lol
What you don't know may not kill you...but it CAN leave you broke. lol
1 person likes this
@moffittjc (128824)
• Gainesville, Florida
8 Oct
@porwest You should have turned this comment into a discussion! The $100,000 losing so much value over 40 years is staggering. And you’re right, most people don’t look at the future when it comes to making choices about their money. They only see the year and now.
1 person likes this
@porwest (112717)
• United States
10 Oct
@moffittjc I think many of my comments are posts within themselves. In some circles I have been called a windbag. lol. I am sure this "theme" will definitely come up as a future discussion...with me that seems inevitable. But yes, people simply do not understand how money works and about opportunity cost and so...
We continue to have a major gap in this world between the rich and the poor. At least, it helps to explain the gap.
1 person likes this
@May2k8 (19788)
• Indonesia
5 Oct
For those with low incomes, the money they save in the bank won't be enough, as it will be eaten away each month for daily expenses and administrative costs. Furthermore, bank interest rates here are very low, around 0.85 percent per year.
For 10 years in Indonesia there has been no salary increase while prices have all gone up.
1 person likes this
@porwest (112717)
• United States
4 Oct
Taxes are always an important part of the mathematical equation, but of course I always leave it out because it just overcomplicates the illustration. Sure, you're technically still losing money, but you are doing better than someone with that 0.40% interest rate, and it would appear to me that you are at least actively engaged in trying to maximize your return, which is, of course, an important part of it.
As for emergency funds, they SHOULD rightly be in an easily accessible account, and that usually means a lower interest rate regular savings account. The message here really applies mainly to those who ONLY maintain a savings account for all their savings and have no other funds anywhere else.
Here's an interesting thing to consider. Let's say someone puts away $100,000 for retirement into a regular savings account. Even with interest, in 40 years that $100,000 is now worth only $33,370. That's going to be a very different retirement than someone might have expected to have.
1 person likes this
@lovebuglena (52144)
• Staten Island, New York
5 Oct
That is why my personal bank account is in Chase. It’s very convenient when I need to do banking in person. But what they pay in interest is a joke. Our joined funds are in Capital One. What I wanted to do was close the savings account there which I think now pays .2% and open their online savings account which pays between 3% and 4%; I forget the exact amount. But given our current circumstances, I can’t do anything.
1 person likes this
@porwest (112717)
• United States
4 Oct
There IS a caveat here, and that is that everyone should have an emergency fund with at least 6 months worth of income in it, and that money should be easily accessible, and that usually means keeping it in a regular savings account.
But, at the same time, high yield accounts act almost the same way as regular savings accounts and offer easy access with much higher interest payments. One does need to allow for at least three days to access that.
In any event, the message applies to those who ONLY put money into a savings account and think they are getting ahead by doing so.
Unfortunately, they're not.
1 person likes this
