On the surface, it sounds extreme.

A couple of sound mind, two people who dutifully saved and invested for years in anticipation of retirement or a rainy day, lose their cool in a market slide and pull all their money out -- at the bottom of the heap. Maybe they couldn't handle the tech burst in '99. Maybe the market was in the middle of one of its typical swoons and the couple couldn't take it anymore. Maybe they were afraid of Y2K and pulled out before the ball dropped in Times Square. But now they're stuck.

At best, they've parked their money in low-interest savings accounts. At worst, they've stashed it somewhere at home -- an attic, a desk, or even under the proverbial mattress. But one thing is clear -- they're getting very little return on their investment. And in the long term, they're getting poorer by the day.

These people aren't simply anecdotes. They're all around us. According to a study published earlier this year, Americans place last in a worldwide survey of savers. In fact, nearly one-quarter of Americans have no savings at all!

It's a scary place to be.

Powerless in the long term
With little or no savings, our fictional couple -- along with thousands of their real-life ilk in the survey I mentioned above -- has little hope of retiring at a decent age, if at all. By either pulling their money out of the stock market or not putting it there to begin with, would-be retirees are putting themselves at significant risk -- and debilitating their saving power for the long term.

But retirement isn't the only arena in which this couple is suffering. People who don't sock away enough money or don't earn a decent return on their savings can be left wanting in times of need. Without accessible cash, what would happen in the face of a serious illness, a family emergency, or an otherwise debilitating event? Savings and investments equal freedom -- not from life changes themselves, but from the additional financial concerns that such events bring. Without such freedom, finances become an extra worry in an already tumultuous time.

Powerless in the short term
But it's not just retirement and long-term plans that suffer when individuals forego saving. Short-term wealth and security suffer, too.

Let's go back to our couple. What if the husband loses his job? What if the wife goes on disability? What if a natural event -- a hurricane, an earthquake, a fire -- causes damage to their property and, as often happens, insurance doesn't cover the full cost of rebuilding? Without short-term savings -- without funds available in this couple's hour of need -- the family suffers. And such financial problems are much harder to repair than to prevent in the first place. A little foresight makes all the difference.

The Foolish bottom line
In the long term, the short-term risks don't matter. You're better off putting cash in investments and long-term savings vehicles rather than letting it languish at home. If you don't have time to follow your investments individually, consider an index fund like the Vanguard Total Stock Market (FUND:VTSMX) or a complementary index ETF like the SPDRs (AMEX:SPY). Such a fund makes it easy to hold all the biggies: 3M (NYSE:MMM), Procter & Gamble (NYSE:PG), Starbucks (NASDAQ:SBUX), and eBay (NASDAQ:EBAY), just to name a few.

But while you're investing, keep a little held back -- not under the mattress, mind you, but in a relatively risk-free environment. Money market accounts, CDs, and plain-vanilla savings accounts are easier to get to and less risky in the short term, thereby making them the perfect spots for emergency savings.

So eschew your mattress, your attic, and your piggy bank as your savings vehicles of choice and plunk your money into higher-yielding vehicles instead. Don't let your hard-earned cash wilt on the vine.

Are your savings -- or lack thereof -- worthy of a "Fear Factor" episode? Take a free trial of Motley Fool GreenLight for tips on how to make your money work for you -- a brand-new issue releases today at 4 p.m.

Hope Nelson-Pope is online coordinating editor at The Motley Fool. She owns shares of Starbucks but none of the other companies mentioned. Starbucks and eBay are Motley Fool Stock Advisor recommendations. 3M is an Inside Value pick. The Motley Fool has a disclosure policy.