When it comes to building wealth, billionaire Mark Cuban’s advice might surprise you. He says you should stop focusing on saving and start aggressively investing your money. While having an emergency fund is important, Cuban argues that leaving cash in a savings account is essentially leaving money on the table.
Even if it happens to be a high-yield savings account with an above-average annual percentage yield (APY), it won’t keep up with inflation and could cost you thousands over time. Instead, Cuban recommends putting your money to work by putting your money in stocks, real estate and alternative assets. Here’s why saving alone won’t make you rich, and how smart investing strategies can help you build long-term wealth.
Cuban emphasizes that the top 1% don’t just save, they make their money work for them and invest aggressively. This includes investing in examples such as the following:
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Stocks and index funds for long-term growth
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Real estate for passive income and appreciation
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Alternative assets like gold individual retirement accounts (IRAs), for diversification
The goal is to make your money work harder than a savings account ever could. Even though saving is important for short-term needs and emergencies, investing offers significantly higher long-term returns. This means you should balance your strategy based on risk tolerance and goals to make sure you don’t let inflation erode your wealth.
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Leaving your money in a savings account, even one with higher-than-normal yields, might not be the best idea. After all, those yields may not even keep up with inflation. This means the value of your savings might fall rather than rise (depending on the account and how much you’re contributing).
But you might still want to have a little saved for emergencies.
“Every individual should have [three to six] months of lifestyle expenses in savings — a checking account and a high-yield money market account. Once they have this money in savings, they should start investing,” said Richard Craft, CEO of Wealth Advisory Group.
You can save money for short-term goals — anything that takes under a year. But if you have long-term goals — anything over a year — investing is generally smarter.
Say you have a savings account with 4.00% APY and a $50,000 balance. After one year, you’d have roughly $52,000. In 10 years, you’d have around $74,000. This assumes nothing changes in that account — no withdrawals, deposits or changes in yield.
