Stop Holding On To Excess Cash: How To Make Your Money Work For You

The U.S. personal saving rate has been on the rise.

The personal saving rate, as defined by the U.S. Department of Commerce, “is personal saving as a percentage of disposable income. In other words, it’s the percentage of people’s incomes left after they pay taxes and spend money.” 

Why It's An issue 

• Having excess cash is a dwindling resource and missed opportunity.
• Individuals find comfort and security in cash, thinking that it is safe. But cash only feels safe because the visual number stays the same. While that balance in your account may stay the same, the power of that money changes everyday and is shrinking over time as prices rise and the economy grows. Therefore, idle cash is weakened everyday.

What To Do Instead

Think bigger picture or long-term. It is important to reframe your mindset to envision your future self years or decades out. This will enable you to be more proactive today about your idle cash. Rather than waiting for an unexpected event to guide your financial decisions, you can gain control today by investing your money wisely. This will give you more time in the market and increase your returns in the long-run.

A Checklist For Going From Savings To Investing

• Get a handle on your finances
• Create a simple budget to track how much money is coming in and going out.
• Build up your rainy day fund
• Have three to six months' worth of expenses in an account that is easy to access for emergencies. Start building this fund with what is feasible for you.
• Pay down high-interest debt
• Keep chipping away: the sooner the better.
• Invest for your future self (remember to think long-term)
• Put aside at least 15% of your pre-tax income every year toward retirement.
• Establish a retirement plan like a 401(k) or a traditional retirement account or a Roth IRA.
• The democratization of investing has made it easier than ever to start investing with a little as a few dollars, so save and invest at the same time.

Kate White is a Benzinga intern.