- 2 days ago
Why Keeping Over THIS AMOUNT In a Bank Is a Huge Mistake
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00:00What if I told you that keeping your money safe in the bank is actually one of the most dangerous
00:04things you can do with it? Through my nine years working in banking and now helping people with
00:10their personal finances, I've seen the same mistake over and over again. People keeping
00:16tens of thousands in their accounts, feeling satisfied that the bank balance is growing,
00:21thinking that they're being good with their money, but actually the complete opposite is true.
00:26There's over 526 billion sitting in low interest accounts in the UK right now,
00:32earning basically nothing. That's impacting 29 million people. And in the US, half of Americans
00:39have more than $8,000 sat in similar accounts. All these people are losing money every single year,
00:47completely unaware about it. So in this video, I wanted to share with you why having too much cash
00:53is one of the most dangerous mistakes you can make when it comes to money. And we'll also cover what
00:57you should be doing with that money instead. Let's get into it. First and foremost, cash is the
01:03laziest worker you'll hire. You know that feeling when you've just finished another exhausting week,
01:09you worked overtime, you dealt with difficult colleagues, you sacrificed your evenings,
01:14maybe even the weekend, put in the sweat, put in the stress, the mental energy to make say
01:1910,000 and you put it in a bank account. You check that bank account after a year and your money has
01:25just sat there, been lazy and hasn't created any more money for you in that timeframe. Not only that,
01:31but it's now also worth less than it was a year ago. It's the same 10,000, but you're able to buy
01:36less with it because of inflation. That's what happens when you keep your money saved in a bank
01:41account. It sits there motionless, doing nothing for you whilst you're out there working really hard.
01:47Now, what if instead, instead of putting that money in a bank account, you decided to put it
01:51somewhere else where it continued working for you whilst you continued making money. It also went
01:57out and made some extra money for you. That is what investing your money is. If you put that same
02:0210,000 to work in something that generates say 8% returns, and I'll talk about in a moment how to do
02:08that safely. After one year, it becomes 10,800. Then that 10,800 in the second year becomes 11,664.
02:17And each year from then on, you're earning more money on your money that you no longer have to
02:23work for. Over 10 years, your lazy cash that did nothing for you stays at exactly 10,000. But the
02:29money that went out and made more money for you grew to over 21,000. That's more than double. An extra
02:36are over 11,000 that you never had to sacrifice another evening or a weekend to earn just because
02:42you put your money to work instead of letting it sit in cash doing nothing for you. This is one of
02:47the biggest reasons why you don't want to be keeping more than you need to in a bank account
02:51because you're just missing out on potential earnings. Moving on to point number two, the
02:56emergency fund trap. I know what you're thinking, but Nisha, what about emergencies? You've always said
03:01we need to save an emergency fund. The point of an emergency fund is in a worst case scenario,
03:06if you lost all your sources of income, do you have enough money saved up so that you can continue
03:13paying for your living costs for the foreseeable future? So much so that if there was an emergency,
03:19you're not left without being able to pay for shelter or for food. And when you strip away
03:24everything else except those core living expenses that you need to think about, that's mortgage or rent
03:30payment, groceries, essential bills, minimum debt payments, whatever that total is, multiply it by
03:37three for the basic emergency fund. Or if you want more protection, multiply it by six. Also, if you're
03:43self-employed or you have an unstable employment situation, you can multiply that by nine. That's
03:48the size your emergency fund needs to be. It does not need to be more than that. When I worked in banking,
03:54I had colleagues with $40,000, $50,000, $70,000 in their accounts telling me it was their emergency
04:00fund. But when we broke down their actual monthly living expenses, just those core living expenses
04:06that we spoke about, their real emergency fund was less than half of that. The rest was just fear
04:12money, sitting there losing value every single day. So yes, save up your emergency fund and make sure
04:19it's A, sitting in a high interest savings account and B, easily accessible with no fees needed to
04:26withdraw. That's all you need for an emergency fund. Personally, I'm currently saving my emergency fund
04:31in Plum. They're offering around 4% on their easy access savings, which means it's very accessible
04:37and it's saving my hard-earned money from inflation. Link is in the description if you want to check it out.
04:43The third reason, and I made this mistake this year, is because it will feel like spending money.
04:49Having too much money sitting in your account actually tricks you into spending more. If you
04:54think about it, you check your bank account, you see $15,000 sitting there and your brain goes,
04:59oh, I've got loads of money. So you buy those shoes you've been eyeing up, you grab dinner out
05:04instead of cooking, maybe you book that weekend trip because in your head, you're still thinking,
05:09I've still got lots of money in my bank account, I'm still rich. But here's the problem, that $15,000
05:13wasn't actually meant for spending. Most of it was your emergency fund or money you were saving
05:18for a house deposit or just cash you hadn't figured out what to do with yet. But because
05:23it's all lumped together in one account and you see the size of that amount, it feels like spending
05:29money. I experienced this myself recently. I recently switched bank accounts. And so for a
05:33couple of months, I didn't have my automation set up. And so when I was earning, it was all getting
05:37put into one account. And I realized after a few months, my spending had increased. I was making
05:42these impulse purchases. I normally wouldn't because I could see the money just sitting there.
05:47So I had to quickly set up my system again where the money gets invested directly from
05:51my business account before I even pay myself a salary. And then I pay myself a salary. And
05:56then from there, it goes into other investments, my personal investments, towards my bills, towards
06:01my savings. And it's all automated. The key is making sure your money is out of sight before
06:06you can spend it unnecessarily. If it's automatically moved into investments or into different saving
06:12accounts before you can even see it, you are so much less likely to make those impulse
06:17decisions. By the way, if you're watching this and you know you need to be doing more
06:21with your money, but you feel overwhelmed, even when you're just thinking about how to
06:26start, I've got a six week investing accelerator program that is about to launch this October.
06:32It's designed to cover absolutely everything you need to create your path to financial freedom
06:38in just six weeks. And it will also, for the very first time ever, include one-to-ones with
06:45me. You can find out all the details in the link in the description and sign up if you want
06:49to join the Wake Best. Moving on to the fourth reason, and that is because insurance won't
06:55cover you if you save too much. Here's something that might actually surprise you. There is a
07:00limit to how much the government will protect you if your bank goes under. In the UK, the
07:06FSCS only covers up to $85,000 per person. In the US, it's $250,000 through FDIC protection.
07:15So if you're thinking, okay, well, I'm nowhere near those limits, then you're probably fine.
07:19But if you are approaching or exceeding these amounts in a single account, you're just taking
07:24unnecessary risk. You might be saving this money for a goal that's happening in the next
07:28five years, which is why you might not want to be investing it. The solution is to ask yourself,
07:32why is it that you need that much money sitting idle in the first place? The only reason why you
07:38might need it on top of your emergency fund is if you're saving for a specific goal that's coming up
07:44in the next five years, like maybe a house deposit, paying for a wedding, a car purchase. For that,
07:50the five-year rule matters because the stock market can be incredibly volatile in the short term.
07:55Your investments might be worth $50,000 today and then $45,000 next month and then $55,000 the month
08:01after that. And if you need that money in two years for a house deposit, you can't afford to
08:06risk it being in a dip right when you need to buy. You'd be forced to sell at a loss, which kind of
08:12defeats the whole point of investing. But for money you won't need for the next five years, the short-term
08:17volatility will end up smoothing out over the long term. So you benefit much more from long-term
08:23growth. So if you do have large amounts earmarked for short-term goals, spread that into cash across
08:29multiple banks to stay within those insurance limits. But anything above your emergency fund
08:34that you won't need for at least the next five years, that should be invested where it can
08:38automatically grow for you rather than sitting in an account where it's losing its value to inflation
08:43and potentially at risk if you exceed the insurance limits. And then moving on to one of the biggest
08:48reasons, and this is you become more of a target. If you're watching this and thinking,
08:53oh, it's fine, I don't need to worry about this point because it's not going to happen to me,
08:56I'm more clued on. It really isn't something worth being complacent about. Scams are becoming
09:01incredibly sophisticated. They can even impersonate someone's voice. And there was a tweet I read
09:07just this week. It was from Eric Bergman. He's a multimillionaire. He founded Greg.com.
09:13And he recently shared a story about how he got scammed. He got a call from Mr. Beast to donate money
09:19to Team Water that helps build wells in Africa and helps people get clean water. And he donated
09:26$1 million. And then a week later, he got a WhatsApp message from Team Water, the company that he donated
09:31to. And they were inviting him to join a group with Mr. Beast and some other billionaires for a trip to
09:36Africa. And after a week of back and forth in this group chat, Mr. Beast announced that he had early
09:42access to this new Coinbase crypto coin. And he wanted to share with all these big donors that were in
09:47this WhatsApp chat. And then everyone got really excited. They started investing. And Eric said how
09:51he didn't know much about crypto, but he didn't want to be left out. And so over three days, he sent
09:57$1.2 million in three different rounds for this coin. And just as he was going to invest some more,
10:04something fell off. And he decided to call the real Mr. Beast to confirm everything. And Mr. Beast
10:09had absolutely no idea about the entire situation. Everything was fake. The WhatsApp group was fake.
10:14The people in it was fake. The trip to Africa was fake. The coin, all these billionaires. It was a
10:19complete made-up scenario purely to scam him. You can read about it online. He's also tweeted about it.
10:25Such a courageous move. And it really is to drill down or drill home the importance of this. You can be
10:31anyone. You can be the smartest person in the room with all the money, with millions in your bank account
10:35and get still caught in something like this. Just don't take the rest. Be really cautious. Put as much
10:40money as you can into sensible investments that you understand before you do anything that you
10:46might completely regret. On that note, one of the most sensible investments that you can make
10:50alongside investing in assets is investing in yourself. And with that, I wanted to introduce
10:56the sponsor of today's video, which is Brilliant. Brilliant is an online learning platform that I use
11:03and love. It takes super, super complex topics that we know and use and think about in everyday
11:09life. AI, data analysis, crypto, and it breaks them down so they actually make sense. You can learn by
11:15doing, not just reading, with so many interactive lessons covering everything from maths, from data
11:21analysis to programming and AI. What I love about Brilliant is that it helps you build a learning
11:27habit in just a few minutes a day. I'm always saying that consistency beats intensity and Brilliant
11:33makes us so easy to stick to. You can learn on your phone wherever you are. So whether you're just
11:39waiting for your coffee or you have a few minutes between meetings, you can just squeeze in a quick
11:44session and actually make progress. Think of it like a gym for your brain. You get daily challenges
11:49in science, in coding, in problem solving, even designing circuits and running data simulations.
11:55So whether you're a student, you're a working professional or you're just someone who loves
11:59learning new things, Brilliant will have something for you. You can try Brilliant at
12:04brilliant.org forward slash Nisha. I put the link in the description below or you can scan the QR code
12:10on the screen right now. Brilliant is also giving our viewers a 20% off of an annual premium subscription
12:16which gives you unlimited daily access to everything on Brilliant. Thank you Brilliant for sponsoring
12:22today's video. If you've got to this part of the video and you're wondering what do I need to do
12:26with my money then? The takeaway here isn't that you need to panic and move all tomorrow but given
12:31all the points you mentioned today, it's very worth being intentional with where your money sits and
12:36making sure it's working as hard as you are. So three steps you can take right now. First,
12:40calculate your emergency fund number. Once you know how much you need, make sure you're saving that
12:45somewhere that you can't touch it and you can't see it and something that's also paying you
12:49a good interest rate. Starting around 3-4% right now. Second, outline your short-term goals. Anything
12:55that you want to do in the next five years, you can also save in a high interest savings account
13:00or a fixed-term account. For everything else, your long-term wealth building, get it invested
13:07in diversified index funds, specifically through tax-free accounts. Index funds, target day retirement
13:14funds, even look into robo-advisors. I won't go into detail on this video. I've got lots of other
13:18videos on this channel that talks about this in more detail. And third, make sure you're subscribed
13:22to this channel. We post weekly videos. We've just had a bit of a break, but we're back now.
13:27We talk about how to manage your money in a way that gets you closer to your life goals and in a way
13:32that isn't overwhelming, intimidating, or making you constantly feel like you always need to do more.
13:37Thank you and see you next week.
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