Banks protect your money from fire and theft…but the buying power of your money is being drained daily. The FDIC does not protect against value loss of money.
If the interest rate on your account is below the rate of inflation you are losing money…. not as much as hiding it under the mattress, but losing nonetheless. Banks are simply for emergency funds in most cases unless you are able to secure a decent interest rate above the rate of inflation.
The current US inflation rate since March 2013 is 1.1%. If you wanted to buy items for your living room totaling $2000 In March 2013 and put it off one year it would cost you $2022 to buy the same items in March 2014. If you had $2000 tucked away in a bank account March 2013 earning .25%APY you gained $5 by March 2014, but decreased your buying power as your money did not keep-up with inflation. You actually lost $17 because you did not invest your money wisely. If you are not spending money you need to be earning money because your quality of life will eventually suffer; do not be lazy with your money!
Rule #1 for investing…always be aware of the inflation rate.
