What to do with the Money You Save – Part 1: Nothing

by Justin Weinger on September 9, 2006

This is probably the easiest thing for you to do with all of the money you save.  Unfortunately, it’s also probably the worst thing you can do, too.

Doing “nothing” with the money you save essentially means that you’re just sitting on it and it’s not doing any work for you.  The money isn’t sitting in a savings or money market account earning interest, it’s not in stocks, bonds or mutual funds, it’s not paying down your debt – it’s just sitting in your wallet or drawer doing nothing.

While this may seem like the most convenient thing for you to do, financially it’s probably the worst because you’re not letting the money you save make or save more money for you.  Here’s what I mean:

When your money is sitting in a savings or money market account, you will earn a set amount of interest on that money.  Same thing if you have your money in bonds, although you usually have to wait a certain amount of time before you can touch the earnings.

When you’re money is in the stock market (whether stocks or mutual funds) you do run the risk of ultimately having less money, however, traditionally this type of investment returns, on average, 8% annually.

Or you can take the money you save and apply it towards any debt you may have – whether it’s credit cards, student loans or a home loan – the quicker you can pay down your debt, the better you’ll be.

I will go in to more detail in subsequent articles regarding each of the things I mentioned above.  However, the main thing to take away now is to not sit on the money you’re saving – let it grow and make more money for you!

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