# How much value will money lose if left in a checking account?

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?

• Possible duplicate of What are the alternatives to compound interest for a Muslim? Feb 9, 2017 at 17:29
• 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. Feb 9, 2017 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. Feb 10, 2017 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. Feb 10, 2017 at 2:30
• Doesn't the checking account also provide interest, even if it is very little? May 31, 2019 at 23:00

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 doesn't invest it in anything whatsoever, he would have 30,000/(1.02173) = \$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.

• 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, 2017 at 17:44
• 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. Feb 9, 2017 at 18:24
• 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. Feb 9, 2017 at 21:04
• There are banks in the UK which offer sharia-compliant savings accounts, where the money is invested in businesses rather than lent to them, and profits rather than interest are paid to the savers. Such accounts might also be available in the US. See for example: moneyfacts.co.uk/savings-and-isas/guides/… May 31, 2019 at 14:03

He'll lose money in two ways: 1. The value of his money will decline with inflation. Inflation in the US has been running about 2% per year, so he'll effectively lose 2% every year. 2. There's the opportunity cost of the money he COULD make if he invested the money in some way. For example, the stock market has been averaging about 7% per year over the course of the last few decades. If instead of investing the money in the stock market he leaves it sitting in a checking account, he is losing the 7% potential gain.

You don't say what your religion is. (Muslim, perhaps? Muslims tend to take rules against charging interest pretty seriously. But whatever.) I'm a Christian and while most Christians ignore the prohibitions in the Bible against lending money at interest, I take them seriously and so I do not put my money in interest-bearing accounts. But investing in the stock market is an entirely different thing from loaning money at interest. By investing in the stock market I am buying a share of a company. I am now a part owner. The Bible most certainly does not prohibit investing in a business. There's a huge difference between investing in a business that provides valuable services to your neighbors in return for payment, and exploiting a poor person by loaning him money and demanding exorbitant interest.