This Is the Huge Cost of Doing Nothing With Your Money

I'm getting to the age where my friends are starting to wonder if they should be doing something with their money. They perk up at mentions of the stock market, but they don't know where to start.

To be fair, it's complicated. But dipping your toes into the personal finance universe is worth the time spent. Though "doing nothing" often seems the safest, the truth is there's a huge cost to doing nothing with your money. It has to do with two important things: inflation and opportunity.

Inflation shrinks the worth of $10,000 in 23 years

Each year, inflation lowers the value of U.S. dollars. The Federal Reserve tries to keep inflation around 2%, but inflation has historically averaged 3.28%, as measured by the Bureau of Labor Statistics. That inflation number doesn't seem like a lot, but it's more than you think.

Example: Say you had $10,000 saved in January 2000. You stuck that money in a checking account earning 0% APY and left it there. As of January 2023, you still have the $10,000. But now you can buy much less with it. According to the CPI inflation calculator, you'd need over $17,000 saved to match your old buying power. Your money doesn't go as far as it used to.

By keeping your money in a zero-interest account -- or as cold, hard cash -- you invite inflation into your life and your finances in a direct way. Your dollars remain, but as the years pass, your buying power declines.

You can combat this by keeping some savings in a high-yield savings account. The best high-yield savings accounts protect the value of your deposits. But there's more: the real missed opportunity is the money you could have made from the stock market.

You miss a long-term opportunity to grow your money

Thousands of Americans are putting their money to work. Unfortunately, financial literacy education is spotty, so many Americans must figure out how to invest on their own. But if you can stomach the plunge -- or a quick dip -- you can make your savings last decades longer.

Example: The stock market has returned an average of 10% per year over the past 50 years. Had you stuck $10,000 in the S&P 500 index in 1992, you would have $114,300 after 30 years. After adjusting for inflation, that's a whopping $56,500 worth of buying power. That's more than five times the buying power you started with!

It's easy to let opportunity pass you by. When the stock market is down, it's downright tempting to avoid investing. However, following a simple investment strategy is one of the best ways to make enough money to retire, assuming you have enough time, savings, and risk tolerance.

Put your money to work

I started investing when I realized that I'd need to invest to make enough money to retire at 65 or so comfortably. I now invest at least 20% of my earnings in the stock market. It gives me hope for the future. When I turn 65, I may have enough money to retire.

Though nothing is certain, history shows that investing in the stock market is one of the best ways to grow your money long term. The earlier you start investing, the longer your money has to earn money -- and the more compound interest can work its special brand of magic.

Be easy on yourself, but know that "doing nothing" with your money is sometimes the riskier option. It can come at a huge cost to your long-term savings.

Interested in doing something with your money? Check out The Ascent's expert, all-in-one beginner's guide to brokerages so you can put your money to work.