The mattress principle

Putting it under the mattress or burying it in the soil next to the tomatoes is not really an option. There’s a big problem with the hoarding mentality and it goes by the name of ‘inflation’. This constant upward march in prices means money will be worth substantially less in five years than it is today. Consider this: With annual inflation at a relatively benign rate of 3%, $100 today will buy only $86 worth of groceries in five years. If you are hoarding money under your mattress you’re actually squandering it, not saving.

Cash earning interest in the bank is better, but not much. Once inflation and taxes take their cut, you’re still going backwards, even in the high-interest accounts that are popular these days.

Register

Not a member yet?

Register here for free access to our web site and regular email.

Recent Stock Reviews

• Kathmandu or Kathmandon’t?

  In this review, we consider Munger’s Rule before examining this latest private equity float.

• The basics of Brambles

  Our thorough review of this blue chip proved enlightening, though not immediately rewarding.

• Confessions of an aeroholic

  It's been hard for us contrarians to ignore the massive share price declines of Australia's airline stocks. If it was any other business, we'd probably be loading up. But airlines are a uniquely

• View all stock reviews

Recent Education Articles

• Evolutionary investing

  There’s a short circuit in our evolutionary hard-wiring that causes us to risk losing money once we start worrying about not making it.

• How to profit from a share purchase plan

  Westfield’s current Stapled Securities Purchase Plan offers a timely lesson in how to profit from share or security purchase plans, even if you don’t wish to purchase more securities.

• Your guide to retail share offers

  Not sure whether to participate in your company's capital raising or not? Use this guide to make sense of the offer.

• View all education articles