Why are you keeping money in a bank?

Is the multi millionaire road plan working for you?

You're following the multi millionaire road. You're slowly building wealth. You've got your spending under control. You've got a decent income that you're slowly building up. Your cash flow each month is positive. You're putting money into a pension each month. You're maximising your employers pension matching scheme. You're paying yourself first by transferring amounts to savings each and every month immediately after payday...and you're investing your money by putting it into a savings account.

So you think you're doing everything right?

Well, you're not quite there yet. It was all going so well until you decided to simply place your money into a bank savings account.

Since the 2008 financial crisis bank savings interest rates have been incredibly low, virtually zero in some cases. Even today I'd be very surprised if you can find me a bank account that could earn more than 1.5%. Of course, there are special bank accounts out there that can earn 5% on savings up until a certain amount (normally no more than £20,000 in savings), but what do you do once you've maximised this allowance. You'd better not be keeping your money in that bank account! It's a completely unproductive use of the money.

Make your money work for you

You've got to make your money work for you. Money breeds money. The rich do indeed get richer but only if they put their money to good use. You can do the same thing with your cash.

You're building wealth for the long term so you need to consider taking on additional risk. This will involve investing your money in riskier asset classes. At this point everyone jumps to the property options. However this is only an option if you've got savings big enough for a deposit. There are alternatives.

A couple of alternatives to savings accounts and property investments 

You need to start looking into stocks and shares. There are many cheap online trading platforms. Look into cheap (i.e. Less than 0.5% annual charge) index funds that spreads your investment into a wide range of Companies.

Have a look into peer to peer lending. These can be very cheap and pay higher interest rates than bank accounts.

Invest! Don't just save

The point is that you shouldn't just leave your money in a savings account. That's not investing, that's just saving. Simply saving will not get the significant boost from compound interest required to grow serious wealth.

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