Where can I put my savings to atleast match inflation?

[firesoul453]

Hello I've been trying to save a portion of my paycheck for a while now.  I deposit it into a high yield savings account and try to not touch it unless I need to.  However inflation is like 2% a year and my savings account has a rate of 0.80% so the longer I save the less it's worth. Is there any safe or extremely low risk area I can keep it to atleast keep up with inflation? 

I've looked at nearby credit unions but their savings are even worse. 

Thanks for any suggestions. 

[mongstradamus]

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@firesoul453 wrote:

Hello I've been trying to save a portion of my paycheck for a while now.  I deposit it into a high yield savings account and try to not touch it unless I need to.  However inflation is like 2% a year and my savings account has a rate of 0.80% so the longer I save the less it's worth. Is there any safe or extremely low risk area I can keep it to atleast keep up with inflation? 

I've looked at nearby credit unions but their savings are even worse. 

Thanks for any suggestions. 

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Is this for an emergency savings account? If it is than I don't really think you have that many options. You can look into tips, they are like bonds but are supposed to protect against inflation. 

[user5387]

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@firesoul453 wrote:

Hello I've been trying to save a portion of my paycheck for a while now.  I deposit it into a high yield savings account and try to not touch it unless I need to.  However inflation is like 2% a year and my savings account has a rate of 0.80% so the longer I save the less it's worth. Is there any safe or extremely low risk area I can keep it to atleast keep up with inflation? 

I've looked at nearby credit unions but their savings are even worse. 

Thanks for any suggestions. 

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The current best online savings accounts are currently yielding around 1%.

If you buy longer-term CDs, you can do better than this.  For example, 5-year CDs are around 2.25%.

Beyond this, there are reward checking accounts, like the LMCU one.  The basic catch is that you are paid 3% or so, in return for 10-15 debit card transactions a month.

[cflowers0115]

As a Licensed Advisor for a large bank.. I will say this.

Inflation for retirement planning we assume at 3% and let's keep in mind that inflation rates don't include the 2 highest inflationary risks.. gas and food. So true inflation is well above 3% if you factor these two areas in as well. You will be hard pressed to find any conservative checking or savings account paying even close to 1/3 of this. Let alone matching inflation. Your best bets all rely on you tying the money up, or taking on a certain level of risk through investing in the market.

That, to be honest, would be a longer discussion to see what your investment risk comfort levels are.. and what this money is being set aside for.. 

[youdontkillmoney]

If you have credit card debt, putting your excess savings towards paying off credit card debt at 9%+ interest not only beats inlfation at 3% a year but gives you a return that you'd be hard pressed to find anywhere else in any other investment; paying off high interest cards is a guaranteed return.

But if you do not have credit debt or other high interest debt exceeding inflation, then where you invest depends/starts from your individual risk tolerance, if you are not risk averse or can take on risk (being relatively younger helps as you have more time to recover), go into stocks. If you are more risk averse, invest in bonds and/or money markets at your local bank.

[cflowers0115]

I would not recommend to anyone investing in bonds at this point unless it was exclusively for an income stream with little regard for principle.  When interest rates eventually rise (which as some point they will HAVE to), they'll take a bath... since the bond market tends to work inversely of interest rates. 

Just my .02 cents which equates to nothing more than my opinion.. sorry, no cash value on that. 

[cflowers0115]

On the CC debt.. I absolutely agree on that point. If you have debt, the quickest way to beat inflation to pay down the debt. 

[wa3more]

+1 on what Flowers said.

If this is emergency money, you dont have many options right now. You just want cash for easy access.

When rates are higher soon, it will be different story.

[firesoul453]

I don't have any credit card debt. Ya this is my emergency fund, but its grown larger than I expected so maybe I could tie up a part of it in a CD? Idk. I am not up for high risk investing. Maybe a very low risk investment? Idk anything about those at all anyway.

So it sounds like my best bet is to hope interest rates rise higher than inflation?

Thanks for all your replies.

[user5387]

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@firesoul453 wrote:

I don't have any credit card debt. Ya this is my emergency fund, but its grown larger than I expected so maybe I could tie up a part of it in a CD? Idk. I am not up for high risk investing. Maybe a very low risk investment? Idk anything about those at all anyway.

So it sounds like my best bet is to hope interest rates rise higher than inflation?

Thanks for all your replies.

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You might look at the various resources found here:

   http://www.depositaccounts.com