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Personal Finance Terms 101: Cash Investments

Watch more Personal Finance Terms 101 videos: Subscribe to Howcast's YouTube Channel - Learn about cash investments in this personal finance terms video tutorial. Howcast uploads the highest quality how-to videos daily! Be sure to check out our playlists for guides that interest you: Subscribe to Howcast's other YouTube Channels: Howcast Health Channel - Howcast Video Games Channel - Howcast Tech Channel - Howcast Food Channel - Howcast Arts & Recreation Channel - Howcast Sports & Fitness Channel - Howcast Personal Care & Style Channel - Howcast empowers people with engaging, useful how-to information wherever, whenever they need to know how. Emphasizing high-quality instructional videos, Howcast brings you experts who provide accurate information in easy-to-follow tutorials on everything from makeup, hairstyling, nail art design, and soccer to parkour, skateboarding, dancing, kissing, and much, much more. A cash investment is really a very safe way to invest your money so it grows and earns a little bit of interest. Now let me give you a few examples, bank savings account is a cash investment, a money market fund is a cash investment. In other words with cash investments the value of your account is not going up and down each day, but you are earning some interest on that money. The drawback of a cash investment is that you're really not earning a lot of interest, so if you want your money to grow at a greater rate, then at 1 or 2 %, they you really have to look at other types of investment to do that over the long term. So, what is a cash investment appropriate for, any money that you have set aside for an emergency fund or a rainy day fund that should be in a cash investment. You don't want to invest that money in a stock market where it could be tied up or there could be big fluctuations in value. You want that somewhere where you can at that right away if you need to. Another good use of a cash investment would be the down payment for a home or an apartment that you're buying. If I had $30,000 set aside for the down payment on a home purchase, that I'm buying a year from now. Again, I can't invest that money in the market in a way where it could go up and down and put it at risk. But I do want to earn as much as interest as I can in the mean time, so that would be appropriate for a cash investment. Now if I'm saving money for my future, my future retirement, twenty years from now and I put my money in a cash investment that's earning 1 or 2%, and the cost of things are going up, that's called inflation and inflation's 3 or 4 %. I think you can see where I'm going with this, I ???m earning 1 or 2%, the cost of things are going up at 3 or 4% and every year I'm falling behind. And so a big mistake people make that have a long time until they retire is they're often investing their money in their cash investments, because they're not sure what else to do with it. And I've seen plenty of clients where ten years go by and the money only earned 1 or 2% a year and their retirement savings really isn't growing at all. So remember for cash investments stick to something really safe, bank savings accounts, money market accounts a really good place to look, earn as much interest you can in the mean time, but make sure that money is only for short term goals, money that you're going to need in the next year or two.
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