‘Dead money’: Your savings account is losing a fight with inflation. Here’s where 3 financial advisors put cash instead

Inflation has cooled slightly, but it remains above the Federal Reserve’s 2% target. As a result, savings accounts earning interest may still be losing purchasing power, as the interest earned often does not meet the rate of inflation. To address this, some financial advisors are reevaluating where they keep their own cash, seeking options that can preserve purchasing power instead of simply earning interest.

Andrew Fincher, a certified financial planner at VLP Financial Advisers, advises people to focus on cash flow efficiency and review recurring expenses more closely. Andrew Herzog, a CFP at the Watchman Group, has cut back on non-essential services, such as lawn fertilization, to save money. Nicholas Bunio, a CFP at Retirement Wealth Advisors, has delayed large purchases, including a new telescope, and adjusted spending on dining out.

For those looking to keep their emergency funds accessible while earning competitive returns, high-yield savings accounts can be an attractive option. For example, a Wealthfront Cash Account currently offers a base APY of 3.30%, with new clients receiving an additional 0.75% boost during their first three months, totaling a variable APY of 4.05%.

This is significantly higher than the national deposit savings rate, according to the FDIC’s July report. Wealthfront also offers a 0.25% APY increase for new clients who enable direct deposit and open a new investment account, with no minimum balances or account fees, as well as 24/7 withdrawals and free domestic wire transfers.