{"id":38351,"date":"2020-09-04T14:38:23","date_gmt":"2020-09-04T11:38:23","guid":{"rendered":"https:\/\/www.bondora.com\/blog\/?p=38351"},"modified":"2020-09-04T14:38:23","modified_gmt":"2020-09-04T11:38:23","slug":"can-a-savings-account-make-you-rich","status":"publish","type":"post","link":"https:\/\/goandgrow.eu\/en\/blog\/can-a-savings-account-make-you-rich\/","title":{"rendered":"Can a savings account make you rich?"},"content":{"rendered":"\n

The year is 2020. Online investment platforms are popping up everywhere. From real estate to loans\u2014you can easily find a way to invest with just a few clicks. And yet, some people still choose to leave their money in a simple bank savings account.<\/p>\n\n\n\n

And that\u2019s understandable. After all, many people were taught that banks are the holy grail of financial safety, the standard for liquidity. And so, they believe keeping their funds in a bank account is the best thing they can do to protect their hard-earned cash.<\/p>\n\n\n\n

But is that still true? And do savings accounts actually help you to grow your money? And more importantly: Can they make you rich?<\/p>\n\n\n\n

\"Savings
Savings accounts and getting rich\u2014are they a match?<\/em><\/figcaption><\/figure><\/div>\n\n\n\n

How much does a savings account actually yield?<\/h2>\n\n\n\n

Most savings accounts in Europe yield less than 1%<\/a><\/u> per year. In some countries you would be happy to find something returning up to ~1.5% p.a. That\u2019s not a very big number.<\/p>\n\n\n\n

If yield rates represent how much your money grows, inflation rates represent how much the level of prices have risen\u2014in other words, how much your money has lost its value.<\/p>\n\n\n\n

Now, if you compare yield rates for savings accounts with inflation rates in Europe in 2019, in most cases the annual returns wouldn\u2019t even cover your money\u2019s loss of value.<\/p>\n\n\n\n

Take for example Germany, with an inflation rate of 1.4% in 2019<\/a><\/u>. If you were putting your money into a savings account in Germany with a whopping 1.5% annual return rate, you would basically gain nothing, due to inflation. And the situation could be even more dire in other countries<\/a><\/u>, like Austria (1.5%), the UK (1.6%) or Norway (2.2%). In fact, the average inflation rate in the Eurozone in 2019 was just above 1.4%<\/a><\/u>. When you compare these figures, it becomes clear that if you\u2019re only relying on a European savings account, your money is most likely not growing at all.<\/p>\n\n\n\n

\"An
An old school piggy bank isn\u2019t a very good investment option either.<\/em><\/figcaption><\/figure><\/div>\n\n\n\n

A world without inflation<\/h2>\n\n\n\n

Now let\u2019s scrap that inflation talk for a second. Even without it, it would take around 46 years and 7 months for you to double your money\u2014and that\u2019s with one of the best savings account interest rates around (something close to 1.5% p.a.). Now that\u2019s a very long time to wait for very little gains.<\/p>\n\n\n\n

So, in short, it\u2019s not likely that you\u2019ll get rich with a savings account, even in a world without inflation. So what\u2019s the alternative?<\/p>\n\n\n\n

Going beyond savings accounts<\/h2>\n\n\n\n

The good news is, there are other ways to grow your money. The alternative route is to invest your money where it\u2019s wanted the most\u2014in assets that will pay you more.<\/p>\n\n\n\n

Take Bondora\u2019s Go & Grow<\/a> for example. Its returns are up to 6.75%* p. a. and with that rate, in a world without inflation, you would double your money roughly every 10 years and 8 months.<\/p>\n\n\n\n

The power of compound interest is strong\u2014and it shows. A nominal increase of 1% in one annual interest rate today wouldn\u2019t just make you 1% richer in 10 years\u2019 time. As the interest compounds, the difference in your total portfolio after a decade would be closer to 9.94%<\/a>!<\/p>\n\n\n\n

So if your goal is getting rich, or at least growing your net worth considerably in a short amount of time, then search for investment options that provide higher yields and are overall better for you.<\/p>\n\n\n\n

\"Investing
Investing is the way to grow your money.<\/em><\/figcaption><\/figure><\/div>\n\n\n\n

The good side of savings accounts<\/h2>\n\n\n\n

But savings accounts aren\u2019t all bad. Holding a bank account normally gives your very fast liquidity. And that\u2019s a good thing. But making you rich, isn\u2019t one of its strengths. If you like to have quick access to your money, then you might consider leaving some small part of your funds in your savings account. But if you really want your money to grow, it would be wise to invest the other part of your portfolio into more profitable alternatives.<\/p>\n\n\n\n

Bondora\u2019s Go & Grow<\/a><\/u> is also a fast liquidity option, as you can request to cash out at any time. But if you\u2019re looking for even more options, make sure to check out these articles first:<\/p>\n\n\n\n