During an episode of the popular Dave Ramsey show, host and personal finance expert Dave Ramsey preaches on not investing in banks or savings accounts. Here’s why he does not recommend this.
Ramsey, who is often known for his blunt but truthful advice, has warned his audience against investing their hard-earned money into banks and savings accounts because, according to him, you’re lending the bank your money.
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“Don’t be a loaner. Be an owner,” Said Ramsey.
He explained, “When you put money in a bank you’re lending them your money, and they’re paying you interest,” which he admits is often not a lot of interest. So, to make money, you need to be the owner of the money. How do people go about doing this? Ramsey advises putting it into an investment. He added, “There’s never any money in putting your money in the bank.” Own your money and not loan away your money.
This advice is targeted not only at investing in banks but also at investing your money in savings accounts. According to the personal finance expert, investing money in a savings account is not going to make you money on that money. On social media platform X, he wrote, “You’re not trying to make money on this money. You’re trying to save for specific purposes like emergencies, a down payment on a house, a family vacation, or even next year’s Christmas fund.” If investing your money into a savings account is something you want to do, Ramsey does acknowledge that a high-yield savings account is a better option but points out the cons of investing your money into a savings account instead of something like growth stocks.
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High-yield savings accounts have higher interest rates, which means you can meet your savings goals more quickly. But here’s the catch: they’re not great for long-term saving goals or if you want to make money from your money. Ramsey admitted, “Though high-yield savings accounts provide a much higher rate of return than traditional savings accounts, they’re still lousy for long-term investing.” The other problem with savings accounts, according to Ramsey, is they don’t ensure your money is actually growing in value.
If you are going to invest your money into one of these savings accounts, Ramsey advises people to only store their emergency savings and funds for immediate purchases in this account. Your retirement savings should be tied to better investment strategies. For Ramsey, this means investing in growth stocks.
During another episode of the Dave Ramsey show, the finance guru revealed that the key to Americans growing their first $1 million is to invest steadily in growth stocks, not banks.
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This year, Ramsey Solutions conducted its survey, The National Study of Millionaires, which surveyed over 10,000 millionaires. The study revealed that eight out of 10 millionaires surveyed said they invested in their company’s 401(k) plan, and another 75% revealed that they invested consistently over the long term. Doing this is what can “cause people to get their first $1 million to $5 million,” said Ramsey. Highlighting that this long-term approach to investing is a path to significant financial growth.
Ramsey advises people to make compound interest work for them by investing in growth mutual funds, which is something that he personally does with his money. “I invest in those in up times, in down times, in all times. I never stop.” The great thing about mutual funds is that there are plenty of choices. You can choose to invest your money in income funds, money market funds, value funds and even hybrid mutual funds. So, according to Ramsey’s advice, “Start investing and keep investing – no matter what.”
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This article Dave Ramsey Preaches The Power Of Ownership Over Loanship, Saying ‘There’s Never Any Money In Putting Your Money In A Bank’ originally appeared on Benzinga.com
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