The concept that savers are losers might not make a lot of sense to you. This is because we all grew up with the so-called valuable lessons of saving money – work hard, place your money in your trusted savings account at your local bank, and you will be all set in regards to your retirement fund and other necessities. But if you dig a little deeper, you will find that saving money will actually cause you to lose money. Yes, you read that correctly. You may be thinking that this can’t be true, but once you dive into our article, you will understand the big picture as to why savers are losers. So, let’s find out why saving money is a bad idea.

Why Savers are Losers?

A penny saved is a penny earned! We have all heard that statement and agreed with it. But we are here to tell you that it’s not true. The money you save today will not have the same value at a later date. This is due to inflation, taxes, and other factors. You see, money’s value is not backed up by gold anymore. At this point, money is just paper, and its value is at the mercy of the government and the economy. Additionally, if you take this to another level, you will find that by saving your money, you lose out on possible financial opportunities.

So, if you have been asking yourself, “Can I lose money by putting it in a savings account?” The answer is most certainly yes. Are you starting to see the light as to why savers are losers? Let’s break down a few of these details that would cause you to lose money if you save it:

1. Inflation Causes You to Lose Your Savings

Each month you happily place money in your savings account. On the surface, it appears you are making the right financial decision. Once a few layers are revealed, and you calculate a few things, you will find that you’re not actually saving money, your losing money and purchasing power. One of the big reasons you are losing money that’s placed in a saving account is inflation.

Here is an example to help put things into perspective – Your money was placed in a savings account, and let’s say you were getting a higher than average interest rate of 1%, and at that time, inflation was over this by 2%. When you run the numbers, you will see that you are losing money each month and not actually making money. Add on top of that bank fees, and you lose even more of your savings. You are literally throwing your money away by putting cash in your savings account.

Stashing cash at home to avoid bank fees will not help either. As mentioned, money is just paper that loses its value and it’s subjected to inflation whether it’s sitting in a bank or under your mattress.

2. Any Interest Earned in Savings is Taxed at a High Rate

You put your hard-earned money in a saving account and you’re earning interest as planned. Everything is great, right? But wait, the government is taking a portion of your earned interest. This doesn’t seem so great, but it’s the law that you pay taxes on any interest earned from a saving account.

How much taxes will you have to pay on interest earned? Well, that all depends on your current tax bracket. Here’s an example from a previous year so you can get an idea of how much money is being siphoned out of your savings. If an individual made $38,701 to $82,500 in taxable income for the year, their tax bracket would be 22%. Therefore, if $1,000 were earned in interest that year from their savings account, they would be charged 22%, resulting in a $220 payment to the government!

The taxes owed on your earned interest can really add up over the years and become a huge loss of money from your savings account, supporting our statement even further that savers are losers. The interest earned will be taxed if it is kept in your saving account, withdrawn and spent, or transferred. There’s no way around it.

3. Turn Your Savings into Investments or Risk Losing It

Now that you realize saving money is a bad idea, what should you do? We suggest investing your money in performing assets so that you actually make money instead of losing it. Not saving your money is the best thing you can do if you want to build wealth and become financially independent. It may go against the grain of what you have been taught, but what it comes down to is that you will be thankful when your net worth starts growing instead of declining.

What are performing assets? They can be described as something that puts money in your pocket. So, as you can see, an asset is a smart alternative to a savings account. In addition to this, the government favors individuals who purchase assets that are considered pass-through entities and rewards them with tax breaks.

You may be confused as to which assets you should invest your money in, or, what type of assets are available. The four most lucrative assets include the following:

  • Paper – Items such as stocks, bonds, or mutual funds.
  • Commodities – Materials like gold, silver, crude oil, natural gas, and corn.
  • Business – Investing in a business with the goal of generating a return. (Think of the TV show Shark Tank)
  • Real Estate – Generate passive income through rental properties and benefit from capital gains when selling and buying a property.

To make sure you have a clear understanding as to the difference between investing and saving, we are going to take a closer look at investing in real estate.

Investing in Real Estate vs Building Up Your Savings Account

Savers are Losers - Purchase Performing Assets Instead of Saving Money

In summary, if you’re keeping your money in the bank, you are losing money each month due to inflation, taxes, and lost opportunities. If you instead place your funds in a real estate investment such as a rental property, flipping houses or land, you will experience the opposite. Your funds will grow instead of shrink. In addition to this, an asset such as a rental property can ensure a continuous cash flow that will set you free financially, something a savings account can never do.

“When you’re saving money in an interest-bearing account you are losing. It’s a hard pill to swallow, but it’s true that savers are losers. That’s because the value of that money has always gone down and does not keep up with the rate of inflation. The value of a dollar saved is worth less than the same dollar in 5 years. But worse than that, the money is just sitting there. It’s not performing. When you invest in real estate you make money four different ways: 1) Cash flow: A tenant is paying you monthly rent! Can your savings account do that? 2) Depreciation: You pay almost nothing in taxes if you do it correctly. 3) Principle Pay Down: You increase your equity in your houses as your tenants pay down the mortgage. That’s how you build net worth. 4) Appreciation: The value of the asset increases historically, and this is icing on the cake”. ― Clayton Morris, Former Fox & Friends Host

A rental property typically does not decline in value with inflation. In fact, it’s considered a hedge against inflation. If inflation rises, then rent normally increases with it. Therefore, you make more money instead of losing money. Also, increased rent means increased property value. The bottom line is that the dollar loses its value, but assets typically increase in value. This makes investing in performing assets over saving your money a wise decision. If you think real estate investing might be right for you, take a look at this helpful guide to purchasing real estate.

Is it Ok to Save Some of Your Money?

Yes, there are exceptions to the rule when it comes to placing your money in a savings account. This would include putting money aside to pay your taxes, insurance, your yearly vacation. Or maybe you need to make a big purchase – your dishwasher broke or you need a new bed. Or, you feel safer knowing you have an emergency fund available at all times.

In these cases, putting money aside is perfectly fine. It’s when you funnel all your funds into a savings account that it can become an issue. The best place to save your money for these situations would be in an online savings account instead of a traditional bank. Online banks can offer higher interest rates because of their low overhead costs, sometimes as high as 2.25%. You should look for an online bank that is FDIC insured and has no withdrawal penalty. An excellent online bank that you may want to consider using is Marcus by Goldman Sachs.

Stop Losing Your Savings – Start Investing in Assets

If saving money has been engrained in your thinking since you were a child, it may take some time to pull your money out of savings. However, the faster you switch from a savings account to investing in assets, the quicker you will be on the path to financial independence. After some time you will see the results of your decision and realize just how unwise it was to save money, and you’ll fully understand why savers are losers!