Your Finances

The Cost of Cash

Saving money in the bank feels like a safe bet. That’s because you don’t ever see your account balance go down (unless you withdraw it yourself).

But there is a risk: If you’re only saving, you may be unable to reach your financial goals. Many of us need to grow the money we save in order to reach our goals—which is what investing is all about.

Think about this: If you put $25,000 in a savings account, after 35 years of earning interest, you’ll end up with $35,391 or more, assuming a range of many different economic scenarios. And you’re guaranteed not to lose that money.

The Cost of Cash (mobile) The Cost of Cash (desktop)

However, if you invest that $25,000 in a well-diversified portfolio consisting of 60% stocks and 40% bonds, your account will grow to $54,348 or more in 35 years, under the same economic scenarios.

Of course, in the latter example, you risk losing money. There may be times, especially in the early years of investing, when you see your account balance dip down significantly.

In those times, just remember that, while such losses may be painful in the short term, you should be investing with the long term in mind. This is especially the case for your retirement savings, for which historically the reward has been well worth the risk. Taking a chance on investing rather than settling for saving can mean the difference between retiring on your own terms and being forced to work longer.

It is important to save and invest your money in order to achieve your financial goals.

Especially as a woman, with a longer life expectancy than a man, building a large nest egg for retirement is critical. Just saving simply won’t get so many of us there.

We assume your savings are held in a cash investment such as a money market fund, with fluctuating interest rates over time. To project the performance of the cash investment, we used Monte Carlo simulation—a forward looking, computer-based calculation in which we run portfolios through hundreds of different economic scenarios to determine a range of possible outcomes. The results shown reflect an 85% likelihood of achieving $35,391 or better, and include the impact of taxes and inflation, but not additional contributions or fees.

The results presented are hypothetical, and do not reflect actual investment results, the performance of any Ellevest product, or any account of any Ellevest client, which may vary materially from the results portrayed for various reasons. The results presented are not for any specific product and do not take into account specific product fees. Financial forecasts, rates of return, risk, inflation, and other assumptions have been used as the basis for the results presented.

We assume your savings are invested in a portfolio comprised of 60% Large Cap US stocks and 40% US bonds, which is rebalanced to this allocation each year. This commonly used allocation is for illustration only and does not necessarily reflect Ellevest recommendations. To project the performance of this portfolio, we used a Monte Carlo simulation—a forward looking, computer-based calculation in which we run portfolios through hundreds of different economic scenarios to determine a range of possible outcomes. The results shown reflect an 85% likelihood of achieving $54,348 or better, and include the impact of taxes and inflation, but not additional contributions or fees.

The results presented are hypothetical, and do not reflect actual investment results, the performance of any Ellevest product, or any account of any Ellevest client, which may vary materially from the results portrayed for various reasons. The results presented are not for any specific product and do not take into account specific product fees. Financial forecasts, rates of return, risk, inflation, and other assumptions have been used as the basis for the results presented.

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