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Don’t keep too much money in savings accounts

Don’t keep too much money in savings accounts
I want to talk about 2 problems (one small and one big) associated with keeping too much money in your bank account today.
You must be thinking, how can keeping money in my account be a problem? After all, more money into account is a good thing – RIGHT?
Let’s see

Problem #1 (small problem) – Negative Real Return

Let’s talk about the small issue first.
The money in your savings bank account earns a small interest of just 3.5% per year (in most of cases).  Inflation is around 7-8% on average and if you consider that, you are actually earning a negative real return (real return = return – taxes – inflation).

Problem #2 (Big problem) – That excess money gets SPENT easily


Our mind works in a very different manner when we have money lying in front of us. Supply creates its own demand is one of the principles of economics and very much applicable to money. If you have money in a savings account, you can be sure that your mind will come up with every possible reason to spend it.
Our mind works in a very different manner when we have money lying in front of us. Supply creates its own demand is one of the principles of economics and very much applicable to money. If you have money in a savings account, you can be sure that your mind will come up with every possible reason to spend it.
So if money is lying around in your saving bank account, which can be easily accessed then,
  • Your TV will look old enough to you and your mind would like to upgrade it for a bigger one
  • That Amazon Cart will automatically have those unwanted items which you really don’t need (but you feel you need it)
  • You will feel that you can easily afford to give a bigger and fancier gift when you are invited to a marriage
  • Those swiggy / uber eats orders will never stop
  • The next vacation will feel within the reach somehow
  • The eating out will often happen
In short, your spendings will increase sub-consciouslySo if money is lying around in your saving bank account, which can be easily accessed then,

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