disadvantages of saving money

In most cases, saving money is a good thing. After all financial experts constantly tout the virtues of building a healthy emergency fund. They also tout stashing cash for retirement, saving for big purchases, and more. However, there can be drawbacks, particularly this year. Here’s a look at eight disadvantages of saving money in 2022.

1. It Can Leave You Cash-Strapped

Currently, inflation is putting pressure on most people’s budgets. This is particularly true of lower and middle-income households. Prices rose with shocking speed, and wages simply aren’t keeping up. As gas prices continue to soar and grocery bills continue to tick upward, many households are finding it harder to make ends meet. If you add trying to save in that mix, then some households may find themselves incredibly cash-strapped.

While it’s still wise to set money aside if you can reasonably do so, the current climate also means a pause could be justified. Examine your budget to determine if your budget can support more savings activities and if not, remember that you can always pick back up when the situation calms.

2. Interest Rates Are Low

If your idea of saving is moving money into a traditional savings account, there’s a good chance your balance isn’t growing by much. Savings account interest rates are incredibly low. Even high-yield accounts are commonly well below 1 percent, preventing savers from reaping much in the way of rewards for their good behavior.

While that doesn’t mean you shouldn’t keep a classic emergency fund in a savings account, as that does ensure your cash stash is reasonably liquid, any other money you aren’t using for living expenses may be better sent elsewhere.

3. It Isn’t Going to High-Interest Debt

As mentioned above, savings account interest rates aren’t great. Since that’s the case, many households would get a far better return by directing extra cash toward their high-interest debts, like a credit card.

Additionally, paying down high-interest revolving debt can do more than get you the biggest bang for your buck. A smaller credit card balance usually comes with a lower minimum payment, giving you a bit of wiggle room in your budget during an emergency. Plus, if you had a card nearly maxed out, reducing the balance typically boosts your credit score.

Technically, even if the debt isn’t a high-interest one, it may make more sense to put the cash toward it than add to your savings account. With savings account interest rates being so low, paying down mortgages, auto loans, student debt, or other debts that are typically considered low-interest could be a better choice if you already have a reasonable cash cushion.

4. You Could Be Investing

While the stock market has seen its fair share of volatility over the past few years, investing typically yields better long-term results than simply turning to a savings account. If you don’t need the cash for at least a few years, you may want to cultivate a diversified portfolio instead. Often, that’s easy thanks to convenient investment options like mutual funds and ETFs. Plus, many app-based brokerages offer fractional shares, allowing anyone to get started, at times for as little as $1.

5. The Money Could Boost Your Retirement

While setting money into a retirement account is technically a type of savings, it is treated differently than a regular savings account. First, there are typically tax advantages, either when you make the deposit or when you prepare to withdraw funds. In either case, it’s something you don’t get with a regular savings account.

Second, by committing more to retirement, you could be setting yourself up to be more comfortable. If that happens, you may have enough financial space to travel, move to a different city, or simply live it up.

In some cases, you may even be able to retire earlier than you initially planned or could avoid tapping Social Security until you’re able to maximize that benefit. Again, that leads to a less stressful retirement.

6. You Could Miss Opportunities

While being a dedicated saver is typically a good thing, it could mean missing out on certain opportunities. You may be hesitant to take a big leap – like starting a business or accepting a new job – as it would mean taking a financial risk, even if you’re in a position to reasonably take one.

Similarly, being overly focused on saving might mean you aren’t seizing legitimately good deals when they come along. While you shouldn’t let a great price lure you into buying anything you don’t need, there are times when being able to capitalize on a deal works in your favor. By being ready for that, you may be able to improve your financial situation overall.

7. Limiting Your Access to Financial Assistance

In many cases, certain kinds of financial assistance aren’t solely based on your income; they factor in the amount of money in your savings account, too. Medicaid, Social Security Disability Income, Supplemental Security Income, SNAP, college financial aid, and many other programs consider how much a person has in savings to determine eligibility.

If you use programs such as those and would have a hard time living without them based on your other sources of income, saving too much works against you. If your balance gets too high, you may lose access to a critical form of financial support, leaving you in a bind.

8. You’re Not Living Your Best Life

Again, setting money aside for the future is a positive. However, if you’re stashing cash to the point of not being able to enjoy yourself ever, leaving you mainly miserable during your day-to-day, you may be going overboard.

If you have solid balances in your emergency fund, retirement account, investment account, and similar savings vehicles and you’re poised to hit your savings goals even if you scale back, consider doing so. In the end, having some joy today is important. Without fun, you may burn out incredibly quickly, which isn’t ideal.

Re-evaluate your approach to saving, ensuring you dedicate a bit of money in your budget to activities you enjoy. That way, you can keep setting money aside while allowing you to reap the benefits of your hard work, giving you a sense of balance.


Can you think of any other disadvantages to saving money in 2022? Have you updated your savings strategy due to rising inflation, higher gas prices, or other changes to your expenses? Share your thoughts in the comments below.

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