fuctfuct wrote:I have just over 19k in my savings account. What that can buy (purchasing power) in 5 years will be much less than it can buy today. That is a huge problem.
Maybe not. It depends on what you want to buy. The price of something else going down is equivalent to the value of your cash going up. (So, for example, the price of Bitcoin falling relative to the dollar is, basically, the same thing as the value of the dollar rising relative to Bitcoin.) Over time, currency tends to lose value in comparison to a broad array of commodities/goods. This is inflation, and some inflation is necessary for a healthy economy. (The opposite, deflation, is really, really, really bad. We’ve only really seen that in the U.S. between 1930 and 1933, and between 2007 and 2008. As you may recall, neither were particular great periods for the economy!) Still, even with healthy inflation, your cash might still gain value relative to some commodities/goods. (For example, the dollar has vastly outperformed CRT televisions and cassette tapes over the last 20 years! Interestingly, cash has also outperformed silver over the last 10 years.) In short, holding cash is preferable to investing it into something that loses value relative to cash, but it is inferior, obviously, to investing in something that gains value relative to it.
You should keep enough liquid assets to cover your expenses for six months. With the rest, and if you’re concerned about it losing value relative to other commodities, you could invest in a diversified portfolio of domestic and international stocks and bonds. For example, you could invest 50% in domestic stocks, 20% in domestic bonds, 10% in foreign stocks, 10% in foreign bonds, and 10 in real estate investment trusts (or some other commodity). You could manage this yourself, or you could invest into some low fee index funds. A diversified portfolio like this will likely gain value relative to the dollar over time, and it hedges against all sorts of risks.
I hope that helps!