Inflation Can Ruin Your Bank and Investment Accounts

I often have a conversation with someone about safety vs. the return on bank accounts and investments. Regardless of your returns, inflation will eat away at these, either reducing your return, or reducing the balance of your investments. 

Currently, as I write this, inflation is about 5% or 6%, depending on what source you read. Some say this is a transitory type inflation, and as soon as supply-demand imbalances work themselves out, inflation will go down to "normal," or 2% or less.

Others say this inflation will last longer. 

Regardless of what the outcome will be -- and no one can accurately predict that -- you need to be aware of what inflation can do to cash or investments. Consider that most quality bond funds pay about 2-3%, high yield bond funds are around 5-6%, and other investments, such as AT%T, will pay a 7% dividend (as least for now). And add in that most banks offer less than 1% -- as low as .05% -- interest, you need to pay attention. 

This chart will show you why. It should get your attention. Plan accordingly.