\n
![](\"https:\/\/fortune.com\/img-assets\/wp-content\/uploads\/2024\/04\/GettyImages-6228-000847-e1712240479280.jpg?w=2048\")
<\/p>\n [ad_1]
\n<\/p>\n
Shortly after the WHO declared an end to the COVID-19 pandemic in May 2023, the Federal Reserve embarked on a series of rate hikes to tamp down on inflation. Their goal was to make it more expensive for consumers to borrow and more lucrative for them to save. Over the course of 15 months, the federal funds rate<\/a> went from near-zero to more than 5%.<\/p>\n Cash and cash equivalents, such as savings accounts, money market accounts (MMAs)<\/a>, and certificates of deposits (CDs)<\/a>, previously offered measly interest rates. Now, they provide annual percentage yields (APYs)<\/a> well above 4%.\u00a0<\/p>\n Fed policymakers have indicated that they anticipate multiple rate cuts this year. If the federal funds rate drops, interest rates on deposit accounts will follow, leaving some wondering where to put their money next.<\/p>\n While it may be tempting to stash your money in cash, cash doesn\u2019t outpace inflation in the long term.\u00a0<\/p>\n \u201cWhen we look at cash equivalents, it\u2019s very difficult to beat inflation long term by parking lots of capital in those types of accounts,\u201d says Ashley Weeks, Vice President and Wealth Strategist at TD Wealth.<\/p>\n Plus, if you keep your money in cash rather than stocks or bonds<\/a> over the long run, you could miss out on substantial returns.<\/p>\n According to an analysis from Schwab<\/a>, between 1970 and 2020, stocks, bonds, and cash offered an average annualized average return of 10.7%, 7.0%, and 4.6%, respectively. When accounting for taxes and inflation, the returns for all asset classes were worse, but cash was the only asset that offered a negative return.\u00a0<\/p>\n Instead of pouring your money into deposit accounts, it\u2019s best to tailor your saving and investing strategy to your investment horizon and financial goals, regardless of what the Fed does with interest rates.<\/p>\n First off, consider your time horizon and liquidity needs, such as when you will need your money and how accessible it should be.<\/p>\n \u201cMatch your savings and investment accounts to the time horizon of your goals,\u201d says Preston Cherry, a Certified Financial Planner (CFP) and founder of Concurrent Financial Planning.<\/p>\n For example, most people should put their emergency fund in a savings account<\/a>, and their retirement savings in stock and bond funds.\u00a0<\/p>\n Why? With an emergency fund<\/a>, you\u2019ll want to be able to access your cash in a pinch and protect your principal. However, if you\u2019re saving for retirement, you probably won\u2019t tap that cash for years or even decades and, therefore, can take on more risk.\u00a0<\/p>\n SPONSORED PARTNER<\/p>\n\nCash may be king now, but it isn\u2019t in the long run<\/strong><\/h2>\n
Figure out your investment horizon<\/strong>\u00a0<\/h2>\n
\n\n\nSoFi Checking & Savings<\/a><\/h4>\n