Jaspreet Singh: Why You Should Not Put All of Your Money in Savings

Jaspreet Singh headshot

When it comes to advice about managing their finances, millions of people turn to Jaspreet Singh, CEO of Briefs Media and host of “The Minority Mindset Show.” In an exclusive interview with GOBankingRates, Singh was asked about common financial advice people shouldn’t follow. He said, “Do not save all of your money.”

Find Out: 4 Genius Things All Wealthy People Do With Their Money

Singh backed up what might seem like pretty unconventional financial advice with sound reasoning and basic math. Keep reading for a more in-depth look at Singh’s guidance, why he says not to put all of your money into savings and what you should be doing with it instead.

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Understanding Inflation and Its Impact on Savings

You might be a little surprised at the advice not to save. Isn’t saving supposed to be part of every solid financial strategy? According to Singh, the problem lies in inflation. He said, “If your savings are not growing faster than inflation, your savings are losing value.”

Singh was referring to an economic phenomenon that affects consumers more than almost any other factor: Inflation is the rate at which prices for goods and services rise over time. As prices go up, the purchasing power of cash declines. In other words, the money you have today will buy you less in the future as a result of inflation.

For the purposes of illustration, imagine you have $1,000 in a savings account that offers a 1% annual interest rate. After a year, you’d have $1,010. With today’s inflation rate — about 3.5% — the value of that $1,010 would effectively be less than the $1,000 you originally put into savings.

Though you gained 1% in accrued interest, you’ve lost 2.5% in value because of inflation and ended up with the inflation-adjusted amount of $984.75. By keeping all of your money in a savings account, you’re not only missing out on the opportunity to make that money work harder for you, you’re losing value.

As Singh pointed out, if the rate of inflation is higher than the interest rate offered by your savings account, you’re effectively losing money as your purchasing power decreases.

Learn More: How Much Does the Average Middle-Class Person Have in Savings?

Turning to High-Interest Savings Accounts

You’re probably wondering, “What’s the alternative?” Singh suggested a simple solution: “Use a high-interest savings account!”

He’s not wrong. Some banks are now offering accounts with an annual interest rate of anywhere from 4.75% to as much as 6%. These high-interest savings accounts can be a great way to not only keep up with inflation but to get ahead.

As long as your savings account has a return of more than 3.5%, you’ll end up with more value than when you started. And, as Singh points out, “These banks are FDIC-insured,” meaning your money is backed by the federal government, which protects you if the bank holding your money should fail.

Beyond Savings: Investing in Cash Flow-Producing Assets

But Singh said not to save all of your money. “Instead of just saving your money, you need to also think about investing your money. I prefer cash flow-producing assets.”

Investments that are reasonably likely to produce cash flow include real estate properties, either through rental income or resale, dividend-paying stocks and even small businesses. These investments not only appreciate over time but also generate regular income, giving them a double advantage over traditional savings accounts.

In other words, don’t let your money just sit there. Keeping all your cash in savings, especially at the rate most banks offer, is a sure way to see it lose value over time. That’s a financial rut you don’t want to get stuck in, as inflation isn’t going away any time soon.

Balancing Saving and Investing for Long-Term Wealth

If you follow Singh’s advice, you’ll want to consider a broader, more diversified financial strategy that includes both high-yield savings accounts and investments in assets that are likely to not only increase in value but earn income for you in the meantime through dividends, rental income or some other profit-generating factor. Investing your money in this way puts you in a much stronger position to stave off the effects of inflation and steadily build wealth over time.

Remember that investments are inherently risky, and it’s not about making drastic changes all at once. Little moves can lead to great gains, and personal financial stability comes from making strategic decisions based on up-to-date information. Don’t rush into anything, and don’t skip doing your homework. If you take advantage of the right assets and opportunities, you can make your money work as hard as you do.

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This article originally appeared on GOBankingRates.com: Jaspreet Singh: Why You Should Not Put All of Your Money in Savings