What This Article Answers
This article compares long-term outcomes of saving in cash versus investing in the market.
Assumptions
- Monthly contribution: $500
- Cash return: 1.5%
- Market return: 7%
- Time horizon: 30 years
The Outcome
Investing produces over 3× more money than saving cash.
Breakdown
| Strategy | Total Contributed | Ending Balance |
|---|---|---|
| Cash savings | $180,000 | ~$240,000 |
| Market investing | $180,000 | ~$680,000 |
Why This Happens
Low returns fail to outpace inflation meaningfully. Compounding requires growth rates above inflation to produce real wealth.
Variations to Consider
- Higher inflation periods
- Shorter time horizons
- Hybrid saving and investing strategies
Key Takeaways
- Cash preserves money, it does not grow it
- Time amplifies return differences
- Investing is required for long-term growth