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Every once in a while, I hear the same advice repeated in different ways:
- “Your savings account is losing money to inflation.”
- “Cash is trash.”
- “You should maximize your earnings.”
From a purely mathematical standpoint, that’s not wrong.
A typical savings account will almost never outpace inflation.
But here’s my answer after years in finance and working with real people and real money:
- My savings account may not be beating inflation, and I’m perfectly fine with that.
- Because a savings account was never meant to be an investment.
- It was meant to be something far more important.
1. Its First Job Is Not Growth. It’s Protection.
A savings account exists to protect capital, not to multiply it.
- There is no market risk.
- No sudden 20% drawdown.
- No sleepless nights because “the market is down.”
For money you cannot afford to lose, safety beats returns. Every time.
In old-school, conservative financial planning, this is the “sleep-well-at-night” money.
And that role is still just as relevant today.
2. It Gives You Liquidity When Life Happens
Real life does not wait for markets to recover.
- Medical bills.
- Car repairs.
- Temporary loss of income.
- Unexpected family expenses.
When those happen, you don’t want to be forced to sell investments at the worst possible time or swipe a high-interest credit card.
- Your savings account is your financial shock absorber.
- It’s there so problems don’t turn into crises.
3. It Protects Your Long-Term Investments from Bad Timing
One of the biggest silent risks in personal finance is being forced to sell at the wrong time.
If all your money is invested and you suddenly need cash, you might have no choice but to sell when markets are down—locking in losses that didn’t need to happen.
A proper savings buffer lets your investments stay invested and recover in their own time. That alone can make a huge difference in long-term results.
4. It Protects You from Emotional Decisions
This part is rarely discussed, but it’s very real.
When you know you have cash set aside:
- You panic less during market volatility
- You’re less tempted to make rash, short-term decisions
- You’re less likely to use debt for small emergencies
In practice, a savings account often protects your investment strategy from your own emotions.
And in personal finance, behavior matters as much as math.
5. Some Money Needs to Be Boring and Ready
Not all money is meant to be “working hard.”
Some money is meant to:
- Pay bills
- Cover tuition or taxes
- Sit there waiting for a planned expense
- Be ready for opportunities or obligations
Savings accounts are financial working capital for everyday life.
They’re not supposed to be exciting. They’re supposed to be reliable.
6. It’s the Right Place for Short-Term Goals
If you need the money in:
- A few months
- Within a year
- For a known, scheduled expense
You should not be exposing it to market risk.
Yes, inflation may nibble at it a bit.
But a market downturn at the wrong time can do far more damage than inflation ever will.
7. Cash Buys You Time, Flexibility, and Options
Having money in savings gives you:
- The freedom to wait
- The ability to say no to bad deals
- The readiness to act when a good opportunity appears
That flexibility, what we call optionality, has real value
Even if it doesn’t show up as interest earned.
The Right Way to Think About a Savings Account
- A savings account is not an investment.
- It is financial insurance, liquidity, and stability.
A sound, traditional framework looks like this:
Savings = safety, emergencies, short-term needs, peace of mind
Investments = growth, inflation-beating, long-term goals
You don’t complain that your fire extinguisher isn’t making you money.
You keep it because when you need it, nothing else will do.
So Yes, It May Lose to Inflation—and That’s Okay
- I don’t keep money in a savings account to get rich.
- I keep money there to stay safe, stay flexible, and stay in control.
And in real life, not in spreadsheets,
That’s often what keeps a good financial plan from falling apart.
Sometimes, the most boring money you have is also the most important.
All the best my friends!!
#acgadvice
