Keeping too much of your savings in cash — whether that’s under your mattress or in a non-interest-yielding bank account — could be silently killing your wealth-building potential, financial experts at investment management firm Vanguard say.
That’s because inflation eats away at the spending power of your cash over time. For example, $126 would go about as far in 2026 as $100 did in 2020, according to Bureau of Labor Statistics data.
Traditional savings accounts earn an average interest rate of just 0.39% per year, according to the Federal Deposit Insurance Corporation. Meanwhile, the overall inflation rate was about 2.4% in January 2026, BLS data shows.
Some high-yield savings accounts can help your cash earn up to 4% in interest per year, according to Bankrate, but most people earn far less. Over half of Americans say their savings earn less than 3% in interest, a Vanguard survey of over 1,000 adults found in January 2025. Nearly a quarter of respondents say their savings earn less than 1% in interest.
“I think the reason why people hold on to extra cash is it can feel safe. But it can also quietly erode progress that investors are making towards meeting their long-term financial goals,” says Kathy Kellert, head of index equity product at Vanguard.
