Before reading what I have to say about storing cash. I want you to first, look at the chart above and try to answer these two questions.
1. What am I looking at?
2. What does this mean?
Now that you have your answers, integrate them with what I am about to share with you. The money that is sitting in your checking account is losing value by the day. Yes, you read that right.
This graph shows the total supply of US dollars in circulation. Over the last 40 years the Federal Reserve (The central bank for the US) has increased the money supply year by year. But since the 2008 financial crisis, the percentage at which the supply grows has increased dramatically. You can clearly see that because of Covid-19 relief packages and stimulus money. The Federal Reserve has printed an absurd amount of money in the last year.
What Does This Mean?
This means that each one of your dollars has now decreased immensely in value. You see the more there is of something, the less valuable it is. Think of gold & silver for example. The scarcity of the two makes them so valuable. Same for special release Jordan sneakers. Most shoes that are priced at thousands of dollars are priced that way because there are so few of them made. But what if the number of shoes doubled in production? The price per pair would drop right? Its the same thing for our money. The more dollar bills there are floating around in the country, the less valuable they are. This is called inflation. (I’m sure you’ve heard a “know it all” business student talk about this before).
Right now the US Dollar is what is known as a fiat currency. A form of money that only has value solely because a government says it does. The government can print as much money as they want, which decreases the value of your dollars.
What Does This Mean For YOU?
“Don’t work for money, make money work for you” -Robert Kiyosaki
I am a college student just like many of you. Last year as a freshman I had every single dollar I earned stored in my checking account. At the time I didn’t realize how much of a fool I was. This money was just sitting there, not growing. I didn’t have many expenses either, so it’s not like I was using say 60% of that money anyway. My only expenses were food on the rare occasion I didn’t eat at the dinning hall, going out twice a week, and other small things.
You and I are fortunate enough that our expenses are so low, we can invest a large sum of our money into assets. Take some money out of your checking account and buy things that will grow your wealth. I did this and increased my net worth substantially. In all honesty, I had about $3,000 to my name in March 2020. I worked 2 summers for this. I took some of that money and invested into assets. My biggest win so far was buying Chainlink ($LINK) in Spring 2020. It is a cryptocurrency that we have covered on this site before, and will discuss more. At the time it was in the $2-$5 range per coin. Now it is $27.00 per coin and I’m still holding. Darnel also has a big position in Chainlink.
My point here is not to brag, but rather tell you that you can do the same. Invest the money you don’t need in the short-term so you can make money work for you. You are not using all the money in your checking account. The more it sits there, the more it decreases in value. Learn to invest, and learn to budget the smaller sum leftover in your checking account.
Past post about Chainlink: http://the-common-trader.com/2020/08/16/never-too-late-for-crypto/