Keeping fit and healthy should be everyone's goal. It means that you can enjoy life to the full. People are becoming more health conscious, and that’s great. Going walking, jogging, regular swimming, and outings on your bicycle are all great ways of staying in shape. But your financial health is important too.
All those people who subscribe to the premise that the best things in life are free are all very well meaning, but they are rather idealistic too. Even the essentials of life, like a roof over your head, are far from free, and if your financial health is in a poor state of repair, life will be tough.
Saving for that rainy day
Even if things are okay financially right now, they could easily change for the worse in the future, so it’s important to plan ahead. In the same way as being physically fit now will help you to weather any illnesses you might pick up in the future, being financially healthy will assist you with to ride any challenging monetary problems that could lie ahead.
Coming back to physical health; there are many ways of keeping yourself fit. There are aerobic exercises, sporting hobbies, weight training, and of course eating a well-balanced, nutritious diet. The same goes for keeping your finances in good health and putting something aside for that rainy day; there are many options to consider too.
The miserable interest rates of cash savings accounts
A lot of Americans are risk averse, and because of this, we tend to put our money into cash savings accounts. While this is safer than investing your money in say, stocks, and shares or ETFs, the interest rates that banks offer is pretty miserable.
According to the Federal Deposit Insurance Corporation,, the average interest you can get on savings is a pathetic 0.06%. Some of the major banks are even offering an insulting 0.01%. Inflation here in the US is currently running at around 1.7% and although this is quite low, it still means that in real terms the value of your money in a savings account is losing anywhere between 1.64% and 1.69% per annum.
We are not alone
It's not just here in the USA where the interest rate on cash savings is so low. In the UK you can get interest on some cash savings accounts anywhere between 1% for instant access and 2% for fixed term. However, against this, inflation in the UK is running at 2.6% and is likely to go higher, so UK cash savers are losing out in real terms too. It’s why so many Brits are turning to investing their money in things like Stocks and Shares ISAs.
The closest thing we have here in the US to British ISAs (Individual Savings Accounts), are IRAs (Independent Retirement Accounts). Both allow savers certain tax benefits. But whereas savers have quite a lot of freedom as to withdrawing money from ISAs, the American IRAs have much stricter rules and penalties for early withdrawals.
Many US citizens are now turning their attention to robo investing. This is investing in stocks and shares and ETFs, so the interest rate is far higher. Interest is also compounded year on year so your investment can grow substantially.
Of course, you have to take the risk factor into account too. But whereas once you had to have something like £100,000 worth of cash to open an investment portfolio, some rob-advisors like Betterment LLC, have no minimum amount.
The benefits of investing in the long term
Any risk on investment is drastically reduced if you are investing long term. It means you are statistically less likely to have to withdraw funds when markets hit a low. Markets always recover in time, and share values continue to increase, so if you are saving long term, you can ride out any storms.