Cash Is Trash

The old saying “cash is king” should be replaced with the more relevant and appropriate saying “cash is trash” as money is worth next to nothing in the bank. But why is cash that is sitting in the bank worthless? Why is dormant cash a poor financial decision? Interest earned on money sitting in the bank doesn’t come close to the earnings that can be made from hard cash, like property, bonds, shares, gold and silver. Your money can and should grow at far greater rates than the banks rates can provide.

The Big Four banks of Australia (Commonwealth Bank, ANZ, Westpac & NAB) are currently offering rates of 2.05% to 2.11% per annum on high-interest savings accounts, yet the rates drop by 0.11% to 0.15% after the initial 4 to 5 months of the account commencement date. For many Australians who have not done their research, these figures seem like a great way to earn more from their money, although there a far more effective and efficient methods of making money multiply. 

Say you had $200K sitting is one of these high-interest accounts. The maximum that money would earn you is roughly $4,000 per annum. Or say you had $50k sitting in one these accounts, your money would be earning you a maximum of $1,000 per annum. Compared to the rates that your money could be growing at, the Big Four’s rates are next to nothing, they’re inadequate. 

Whether we invest in shares and accumulate dividends, or we invest in property and receive rental returns, over time this cash flow can replace your income- this is how financial freedom emerges. We can get rich by working but we get wealthy by investing. 

The fear most Australians have around investing is liquidity. Liquidity gives people a sense of security as it means they have got quick access to their cash. What most Australians don’t know is that they can have their money invested in assets where access is still possible. Investing does not mean your money is locked away and out of reach. If the right investments are secured, along with liquidity, you can relax into knowing that your money is growing at rates far beyond what the banks can offer. 

The first step to setting up effective investment pillars is financial education because without accurate education, we may be missing the opportunity to create wealth and instead, we’re leaving our money in a place that’s hindering its potential for growth.