Ask the experts: Interest rates are low. Should I invest my savings?

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Hanna Horvath, CFP®

Hanna Horvath, CFP®

Managing Editor & Certified Financial Planner™

Hanna Horvath, CFP®, is a certified financial planner and former managing editor at Policygenius. Her work has also been featured in NBC News, Business Insider, Inc. Magazine, CNBC, Best Company, and HerMoney.

Updated February 24, 2021 | 3 min read

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Interest rates are at an all-time low and likely won’t go up anytime soon. That’s good for prospective homebuyers or loan seekers, but bad for savers. High-yield savings accounts are hovering around 1% annual percentage yield, much lower than years prior. Those hoping to grow their money without much risk are finding it hard to do so.

One alternative is to invest your money in the stock market. While you’ll have to assume more risk, the return is typically much higher (not to mention the stock market performing very well right now).

But is it smart? We asked 12 financial experts if you should take a gamble with your savings in the market. Most said no.

Q: Should you invest your emergency savings?

Why some experts think you should invest your money

“If you have three to six months’ worth of expenses saved, keep a couple months’ worth in cash. The rest should be invested. Yes, emergencies can happen, so it's important to have money available to protect you. If you know you will be entering a period of unemployment or other financial hardship, you can easily liquidate your invested reserves. If you never touch your cash reserve over the course of 10 years think about the amount of potential growth you may have missed out on. That potential growth could be equal or greater than the emergency that you eventually need to cover.” Byrke Sestok, certified financial planner at Rightirement Wealth Partners

Why some experts think you should save

“No, I don't believe you should invest your emergency reserves, even at historically low interest rates. If they are truly your emergency reserves, there is no reason to risk putting funds into the market where they would be at risk for market loss. Liquidity, in this case, is indeed "king" and having the cash available to you at any moment — and guaranteed to be there — is worth more than the possibility of earning a little more on the funds in the short term (or the risk of losing it when you need it most).” Sandra Adams, certified financial planner at Center for Financial Planning

“Think back to March 2020. If you were laid off or furloughed at the end of March, you would be forced to sell stocks or even bonds at the worst possible time if you needed the cash.” Mark Halby, certified financial planner at DLK Investment Management

“Earning next to nothing in savings accounts is frustrating. Certainly there's more upside to investing in the stock market, but that obviously comes with more risk. If savings is intended for near-term spending or an emergency fund, the cost of the cash not being there when you need it most outweighs any potential upside in the stock market over the short term.” Brian Fischer, certified financial planner at Economic Concepts

“Keeping your emergency fund in a savings account will almost certainly cause you to miss out on growth. However, the goal of an emergency fund isn't growth and accounts should always be allocated according to their purpose. The purpose of an emergency fund is to ensure that you have sufficient liquidity to fund any large unexpected expenses or periods of reduced income. Events that can cause a market decline such as a recession are often correlated with events that can cause a loss or reduction in income like unemployment or a reduction in bonus compensation. To ensure that the value of your savings doesn't decline when you need it the most, the best place to hold an emergency fund is in a savings account yielding a competitive interest rate.” Colin Overweg, certified financial planner at Advize Wealth Management

“An emergency fund is there for emergencies — which are generally unexpected! An emergency fund should be liquid, and not subject to any volatility. Returns are not the objective. You might find yourself with funds that have dropped in value, just as you need the money.” Herschel Clanton, certified financial planner at Chancellor Wealth Management

Interested in learning more? We have a list of savings alternatives here.

Image & graphic: Nastia Kobzarenko