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Moreover, individuals may save for significant expenses expected in the near term, such as buying a house or paying for education. The volatility of the stock market, which can experience declines of 10% or more as frequently as once a year, underscores the importance of keeping money needed within a short time frame out of higher-risk investments.
The Disappointment of Low Interest Rates
While big piles of cash may provide a sense of security, watching that money sit in a savings account accruing virtually no interest is frustrating. Many standard savings accounts offer interest rates that hover around the mathematically negligible number of 0.01%. This leads many to seek better opportunities for the funds they need to keep available.