Your savings account is rotting.
Gross.
If your savings account is earning you 1% interest, and inflation is around 3%, that means that every day you leave money in a savings account, you’re losing money.
For the sake of simplicity, say you put $100,000 in a savings account for a year.
By the end of that year, you will have earned $1,000 in interest, and lost another $2,000 to inflation. (You’ll have $101,000, but the price of goods and services will have inflated to the effect of you having $97,000.)
Out with the old! Freshen it up.
Now, imagine that $100,000 being in your AIO.
Let’s say the interest rate is 5%.
Now it’s in an appreciating asset, as well as saving you significant interest costs on your mortgage. Say you owed $200,000 on your mortgage, and it’s an AIO. By transferring that $100,000 into your AIO, it remains as liquid as it was in that savings account, but it’s now dropped your balance to $100,000.
5% interest on a $200,000 loan will cost you $10,000 / year. That’s $27.40 per day.
5% interest on a $100,000 loan will cost you $5,000 / year. That’s $13.70 per day.
You’re now saving $416 per month—that’s a car payment--while remaining liquid the whole time. And remember: this is money that you simply moved from one account to another.
In your savings account, your money is only working for the bank.
In the AIO, it’s finally working for you.
