Saving in a bank is the biggest mistake in inflationary times.
From gas prices to groceries, inflation is affecting the wallets of a large number of Americans. The most recent data from the US Department of Labor shows that last month, the consumer price index in the country has increased by 1.2% since February and 8.5% from the same period last year. It seems that in many areas of life, Americans have come to feel that the money in their wallets can no longer buy as many things as before.
According to Kevin O’Leary, an entrepreneur with a net worth of $400 million, the single most important thing Americans can do in times of high inflation is to avoid keeping most of their money in an interest savings account. low capacity.
Millionaire Kevin O’Leary (Photo: Internet).
“Right now, if you put your savings in a bank, you won’t get much interest. The inflation rate right now is above 6%. So you’re actually losing money every 12 months.” , the millionaire said.
In other words, if your bank savings account has an interest rate of 0.01% per month but inflation is at 6%, the value of your money will decrease by 5.99% over that period.
O’Leary added that as a young man, he learned that banks are not a good place to keep cash. The reason is that he finds his savings in the bank “spawn” very little interest.
“I realized I wasn’t going to make much money by saving. Instead, I started learning how to invest,” he said.
O’Leary is on the same side as many famous investors, including billionaire Warren Buffett, who advises people to put their money in automatically diversified index funds. O’Leary points out that despite market volatility, over the years, growth in the S&P 500 index (which includes companies like Amazon, Apple, Microsoft, etc.) has outpaced inflation.
Even when the market is falling, experts often recommend staying calm and resisting the urge to sell. A recent analysis by J.P. Morgan found that the market’s 10 best days since 2002 occurred after sharp declines, including the 2008 financial crisis and the 2020 market crash at the start. the beginning of the pandemic.
In general, O’Leary is not entirely opposed to keeping money in a savings account. He once advised people “should prepare 3 months’ salary in case of emergency”. However, according to him, accumulating more than this number can lead to unnecessary loss of money because of inflation.
Last month, the price of 1 gallon (equivalent to 3.7 liters) of gasoline skyrocketed to $4.33, nearly double what it was in January 2021. Due to a lack of housing supply, the cost of accommodation in the US has now increased by 5%, causing prices in the housing and rental markets to increase.
In addition to the price of gas and accommodation, the price of basic food items is also continuously increasing in the country of flags. Last month, the food price index increased 1%, bringing the total increase over the same period last year to 8.8%. In the previous six months, food prices increased by an average of 0.8 percent monthly.
According to CNBC, no one knows for sure when inflation in the US will slow down, but what is remarkable from a recent CPI report on April 12 is that the index for many non-food and energy items only increased. 0.3% in March. Meanwhile, the rate in February was 0.5%. As such, things may be slowing down and leveling off.
Source: CNBC
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