If low interest rates disadvantage 'savers' what are they supposed to do if they are not inclined to buy and spend? Where should you put your money (instead of it stagnating in low interest rate savings accounts or other low interest investments?)

EDIT: Assume your still looking at low risk, so initially when interest rates were good you were putting your money into safe investments like GIC's and such and getting a reasonable return over several years. And now you want to keep doing the same but the interest rates are terrible so what is the alterative.

Although it would be interesting to hear suggestions for either end of the spectrum (How do high risk takers compensate and low risk takers compensate) even if it means putting your money into investments outside of financial investments (like real estate, etc.)

  • Interest rates adjusted for inflation are important. Typically when interest rates on savings are higher, the rate of inflation is also higher. Jul 14, 2019 at 15:28

4 Answers 4


Personally, I invest in mutual funds. Quite a bit in index funds, some in capital growth & international.

  • I'm near 100% index funds, balancing large cap, small cap, bond, reit, and international. But as noted in my other comment, whether that's the right answer and what the ratios are depends on many factors specific to the individual.
    – keshlam
    Jan 22, 2015 at 14:54
  • @keshlam: Sure, 'right' is going to depend on individual circumstances, but since the OP hasn't told us those, we can only guess. Index funds are, I think, about the best 'no-brainer' choice, but even parking your money in a savings account is better than spending just because it's there.
    – jamesqf
    Jan 22, 2015 at 19:50
  • Agreed. Great starting point, but we might want to either provide or reference a deeper answer.
    – keshlam
    Jan 22, 2015 at 21:28
  • @jamesqf but inn a very low interest rate you may not beat inflation with cash.
    – Pepone
    Jan 24, 2015 at 0:27
  • 2
    @Peter K: You misunderstood. I meant that you never beat inflation with cash - that is, stuffing your money under the proverbial mattress. If you have money invested at interest, you aren't holding cash. And yes, interest rates can be well above inflation: just ask any loan shark :-)
    – jamesqf
    Jan 26, 2015 at 18:22

Since the other answers have covered mutual funds/ETFs/stocks/combination, some other alternatives I like - though like everything else, they involve risk:

  • Live stock. If you live in the right zoning and have some land, you may be able to have live stock, such as chickens. With chickens alone, I've saved about $1500 a year in expenses and they cost about $20 a month in food/water/medicine (granted, I don't buy them fancy food, etc). Assuming you figure out how to get them to do their re-productive thing (trickier than I expected), in their own way, they can compound too. I've sold several of my chicks (baby chickens, not people) to others which is another way you can make money. This year, my wife and I will be buying a cow with another family and split the beef cost, which is a way of buying beef ahead of time. In some cases, this can save quite a bit of money. Here's the key for savers: I use cash in savings to buy required resources ahead of time, like medicine or water, at a good price, which saves me later and by buying in bulk, I usually get an even better price (this is how the average monthly expense comes out to only $20). Supposedly, the price of eggs will rise this year and if they go as high as they're predicting, chickens may be a return of over $2000, which isn't too bad.
  • Other currencies. Just because the US Dollar, Euro or British Pound are paying no interest doesn't mean others aren't. Risky? Yes, but I find what some of these countries are doing by battling deflation even riskier; historically, only fools mess with inflation because it will quickly spiral out of control and it has bankrupted entire empires (see the powerful Mongolian empire as an example or the Weimar Republic). To my knowledge, deflation has never done that. The last time I looked, the Russian Ruble is paying about 19% (very high risk), the Brazilian Real is paying about 11% (very high risk), and the Indian Rupee is paying about 4% (moderate risk). I play a mental game where I try to get more of the currency (ie: more Reals) and forget what the value is relative to the dollar; in the short run, anything can happen - the long run is what matters.
  • Cheap commodities. What can you buy now that requires little storage space that you will need for the rest of your life? How can you buy it in bulk to get it at an even cheaper price? More than likely - though none of us can prove this - inflation will exist in the future and some of those items may double or triple in cost. Buy them now and buy them in bulk. Review your expenses, especially those monthly "gotchas" for ideas. The risk here is that these items may get even cheaper. For instance, razor blades may be even cheaper in ten years, while the current pattern indicates they won't be, it's hard to know.

Example of how these other "saving methods" can be quite effective: about ten years ago, I bought a 25lb bag of quinoa at $19 a bag. At the same company, quinoa is now over $132 for a 25lb bag (590%+ increase vs. the S&P 500s 73%+ increase over the same time period). Who knows what it will cost in ten years. Either way, working directly with the farmers, or planting it myself, may become even cheaper in the future, plus learning how to keep and store the seeds for the next season.

  • 1
    It's not easy to store quinoa for 10 years tho... Nov 9, 2018 at 18:00

I think this is a good question with no single right answer. For a conservative investor, possible responses to low rates would be:

  1. Do nothing. Stay in cash, and accept the lower returns.
  2. More to risky investments, chasing higher returns.

Probably the best response is somewhere in the middle: consider riskier investments for a part of your portfolio, but still hold on to some cash, and in any case do not expect great results in a bad economy.

For a more detailed analysis, let's consider the three main asset classes of cash, bonds, and stocks, and how they might preform in a low-interest-rate environment.

(By "stocks" I really mean mutual funds that invest in a diversified mixture of stocks, rather than individual stocks, which would be even riskier. You can use mutual funds for bonds too, although diversification is not important for government bonds.)

Cash. Advantages: Safe in the short term. Available on short notice for emergencies. Disadvantages: Low returns, and possibly inflation (although you retain the flexibility to move to other investments if inflation increases.)

Bonds. Advantages: Somewhat higher returns than cash. Disadvantages: Returns are still rather low, and more vulnerable to inflation. Also the market price will drop temporarily if rates rise.

Stocks. Advantages: Better at preserving your purchasing power against inflation in the long term (20 years or more, say.) Returns are likely to be higher than stocks or bonds on average. Disadvantages: Price can fluctuate a lot in the short-to-medium term. Also, expected returns are still less than they would be in better economic times.

Although the low rates may change the question a little, the most important thing for an investor is still to be familiar with these basic asset classes. Note that the best risk-adjusted reward might be attained by some mixture of the three.


If inflation rates are high, invest in Gold (or other stable currencies) for maintaining wealth. Gold's markup price is often less than yearly inflation.

It's easily liquified if urgently required.

Bonds which are inflation-protected are also great for increasing wealth and can get very high ROIs

  • But the interest paid on gold is nothing, and it pays no dividends. And it's definitely not guaranteed to go up relative to any given currency. Just look at the gold prices since mid 2016.
    – Simon B
    Nov 7, 2018 at 22:16
  • That's the point, it's a store of wealth that doesn't really inflate, it's better than leaving it in cash
    – mateos
    Nov 8, 2018 at 1:24

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