How Much Are You Losing by Keeping Money in a Low-Interest Account?
π° The Biggest Missed Opportunity
If you've been following me for a while, you know I talk about this all the time. But for some reason, this is still one of the biggest missed opportunities for most people.
Let's talk about the danger of letting your cash just sit in a low-interest account.
πΈ The Photographer's Dilemma
Imagine you work as a photographer for a magazine. You're great with creativity, but not confident with finances. If you can set aside $100 per month, you have two choices:
Option 1: Standard Savings Account (0.4% APY)
- Around the current US average
- After 10 years: ~$12,300
Option 2: S&P 500 ETF Investment (Historical 10% Annual Return)
- Invest in a low-cost index fund
- After 10 years: ~$19,300
The Difference?
$7,000!
That's what you could gain just by choosing a better home for your money.
π Comparison by Numbers
| Period | Savings (0.4%) | Investment (10%) | Difference |
|---|---|---|---|
| 5 years | $6,060 | $7,744 | $1,684 |
| 10 years | $12,300 | $19,300 | $7,000 |
| 20 years | $25,000 | $72,000 | $47,000 |
| 30 years | $38,000 | $207,000 | $169,000 |
The longer the time, the exponentially larger the gap becomes.
π― Start with the $25 Rule
You don't have to start big. Use what I call the $25 Rule:
- Month 1: Start with $50
- Increase by $25 each month
- Month 1: $50
- Month 2: $75
- Month 3: $100
- Month 4: $125...
Over time, you build momentum and your investment contributions grow as your comfort with saving and earning also grows.
π° Worries When Starting Out
I'll be honestβI was scared at first too:
- Worried about making mistakes
- Afraid of losing money
- Not confident with numbers
But I eventually learned how all this investing stuff works.
π¦ At Least Use a High-Yield Savings Account
If investing feels too scary, at minimum use a high-yield savings account:
| Account Type | Rate | After 10 Years ($100/mo) |
|---|---|---|
| Regular Savings | 0.4% | $12,300 |
| High-Yield Savings | 4.5% | $15,000 |
| S&P 500 Investment | 10% | $19,300 |
High-yield savings alone earns $2,700 more than regular savings.
π‘ Key Points
- Don't let money sit in low-interest accounts - The opportunity cost is huge
- At minimum, use high-yield savings - 4-5% APY is the baseline
- Consider investing long-term - S&P 500 index funds are great to start
- Start small with the $25 Rule - Build the habit without pressure
π¬ If You Say "I'm Not Good with Numbers"
Whether you're a creative photographer or someone who says "I'm not good with numbers," investing isn't as hard as you think.
From choosing your first stock or ETF to avoiding common mistakes every beginner makes, you can learn it step by step.
The most important thing is to start. If you don't make your money work, you'll be the only one working forever.