My younger brother has been working for over 3 years now and he has very good financial discipline so he has been able to save more than 30k just from his paychecks (not including 401k which his company gives).

But the problem is he is only keeping this money in a checking account because our religion does not allow us to take any kind of interest.

I have been telling him to put that money into some kind of investment because it loses value due to inflation.

Is this true given the inflation rate today and the value of the dollar? And if so, what is the best way to gauge how much of that amount is lost each year or each month?

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    Possible duplicate of What are the alternatives to compound interest for a Muslim? – Pete B. Feb 9 '17 at 17:29
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    This would be a duplicate if the question was "How can I invest my checking account money?" but the question here is actually "How much value do I lose?" The linked question is a great next step for the OP. – Nathan L Feb 9 '17 at 17:59
  • Have a look at the link provided by Pete B. There are other ways of investing that do not charge anybody any interest. These tend to be profit-sharing schemes instead. – Simon B Feb 10 '17 at 0:28
  • I see the question as "How do I convince my brother that he is losing money to inflation? How much is he losing?" Not a duplicate of the investing question, although that may be helpful as well. – Brythan Feb 10 '17 at 2:30

The average inflation rate in the US over the last 17 years is 2.17% per year. source

So he has $30,000 now. If another 3 years go by and he doesnt invest it in anything whatsoever, he would have 30,000/(1.0217^3) = $28,128 equivalent buying power 3 years from now.

I would not focus on how much money he is losing per year, but instead focus on the religious constraint of not gaining interest. What was the intent of the religious prophet or person who was discussing this issue? If he invested the money with a 1% interest rate, and split the profit down the middle, half of it for his savings and half of it given to a charity of his choice, would that be something that would be likely to change his behavior? Consider this approach if you're trying to help someone to understand the ramifications of a financial.

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    Perhaps you could also ask the question - "If the interest just covers inflation is it still interest from the theological perspective?" It seems unlikely the religion burdens its followers to lose money. – Andy Feb 9 '17 at 17:44
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    I can't upvote this, even though it starts with a simple factual answer to what was asked, because it can't refrain from trying to talk someone out of their religious acts. There may be no logic behind not eating certain foods, not saying certain words, or going to specific places at specific times, but many people do these things (at a cost, financial or otherwise) as part of their faith. Telling them it makes no sense or isn't in keeping with the intent of the (unknown to the answerer) prophet or person just isn't helpful at all. This would be a better answer if the last paragraph was gone. – Kate Gregory Feb 9 '17 at 18:24
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    Kate is right on target. We can probably use a reference, perhaps a Q&A about the rules regarding interest for a Muslim. I don't know the subtle rules about what constitutes interest vs shared profit. But the issue itself 'not able to lend my money for interest' should not be debated within answers. – JoeTaxpayer Feb 9 '17 at 21:04

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