2. Cash Is Bad Investment

Keeping your money in savings account is a very bad investment for Warren Buffett. If you have any interest in the world of personal finance, you have probably already become aware of this fact.

Nevertheless, I will quickly explain why. When you let your money sleep on savings account where rates are generally less than 1%, you earn almost nothing. Of course, you tell yourself that acting like a reasonable person is safer and that at least if you don’t make big money, you don’t lose any of your capital.

Well, that’s not true! Indeed, given that price inflation, which in most cases is much higher than savings rates, your money sleeping on savings account will be worth much less in 5 years. So imagine in 10 or 20 years…

Warren Buffett therefore advises never to leave more than the bare minimum in cash on your savings account.

The rest must be invested in a diversified way to take full advantage of the magic of compound interest.

If you are wondering what the bare essentials are, I think having 6 months’ salary in advance on your savings account is more than enough. This gives you the financial flexibility you may need if you lose your job, for example.