hr: Money

A lot of people have a bundle of cash that is stashed away for a rainy day. The characteristics of these funds are liquidity, and easy availability.

Photo Credit: CrimsonNinjaGirl

However, such features carry a cost. And that cost is typically low interest rates. Now this is fine provided that it’s not too large a chunk of your intended savings. The problem arises, when these low rates actually fall below the inflation.

That’s like someone nibbling away at your stash as you watch the purchasing power of your funds decline by the day. You may feel that you need to invest in something with a higher yield.

And here’s the rub. Stocks that give a higher yield are too risky for the short term. This means that anytime you need to take money out of the market fast, there’s a good chance that you’ll come out the loser.

You may feel that assets with a lock in period are great since they have higher returns. But the catch is that your funds are no longer liquid. If you need money in an emergency, you have to pay the price.

The best bet is to leave it in the bank, or in short term Certificates of Deposit (CD’S). Sometimes you just have to bite the bullet, and make the best of the situation. It’s your safest option in these troubled times. Even if the rate you’re getting is below the inflation rate, take heart. It can’t last forever.