The fact that many people have so much of their money in cash reserves isnt that unique with conservative instincts. None of like to lose money–a truism that economists call “loss aversion.”
But because we can only prevent losses that we recognize, we tend to lose focus on immediate costs , while we ignore more subtle costs and even savings. For example, it’s important to recognize that getting a $4 discount is worth the same amount as avoiding a $4 ATM surcharge. It sure is folks.
With that said, until recently, people in general never thought of things like inflation as a loss. That costs us more than typical bank savings accounts pay us! But, since it doesn’t really feel like a loss, it’s easier to ignore, or accept as a part of life. In reality though, it’s costing us about 4% currently in the US. That’s more than a savings account pays, and many people dont realize they never end up beating inflation when it’s all said and done.
There is a certain level of irrationalness that comes along with this school of thought. It goes along the same sort of path as those that drive all around town looking for the cheapest gas. Driving 5 miles out of the way as a way to save you 5 cents per gallon, combined with the wear and tear of your car will cost you about $4.50–six times the 75 cents you save buying 15 gallons at the lower price claims SmartMoney.
It all adds up so learn to become aware of how to get the best ROI for yourself. You may need to take a notepad around with you and track your expenses and such to see how you really use your money.
