Money Matters:

Don’t Bank On It

[March 2020 | By Jim Elder, Finance Editor]

In the past few years, we have experienced one of the most robust economies in my lifetime. It’s been firing on all cylinders: low unemployment, high gross domestic product, strong housing, record profits, high consumer confidence, and record stock market levels.

The United States stock market indexes grew over 26 percent last year. This helped to boost investment and retirement accounts. Billions of dollars have poured into accounts, making many Americans much richer. As a matter of fact, there are now over 233,000 Americans with more than $1 million in their 401ks. With all the great economic news and investment growth, you would think that more people would want to jump on board and enjoy prosperity.

Unfortunately, a segment of our population lives in fear and are burying their money. Well, not literally burying it, even though some actually do stash cash between the couch cushions or in mayonnaise jars in the backyard. They are also parking their money in banks.

As a matter of fact, there is $14 trillion on deposit in all the banks in America. That money is currently earning a paltry 0.09 percent interest. That’s hardly a sustainable return.

Here in Montrose, there is $800 million stowed away in our local banks. That’s a lot of money for a town of only 20,000 people.

Why so much money in a place barely paying any interest?

The reason is that many folks these days live in fear. Fear that a recession will happen. Fear that the stock market will crash. Fear of a deadly virus. And fear that we will enter into a war against a crazy dictator on the other side of the world. The mass media is playing on that fear and is trying to scare us even further.

All this fear has caused many investors to miss a great opportunity. While they may feel safe keeping their money in a bank, they are losing out each year to inflation. You remember what that is: It’s like a thief in the night that steals a little bit from your wallet every day, and before you know it, it’s worth very little.

In fact, inflation is the leading cause for seniors running out of money and then needing financial assistance from our government.

The best way to combat inflation is to ensure that your investments grow faster than it does. That means investing into the variable markets like stocks, bonds, and real estate.

Some of you reading this may say “that’s too risky for me.” My answer is, yes, the stock market is volatile in the short term; but over many years, it’s one of the best investments because it grows well and thus minimizes inflation risk.

On average, the stock market grows 10 percent per year, while bank savings accounts currently grow only 0.09 percent. Investing in the stock market can double your money every seven years. Right now, investing in a bank savings account can take you over 100 years to double your money.

So, if you want to get a better return on your money, turn off the negative news networks and build a diversified portfolio so you can have a solid retirement lifestyle.