Richards: The hidden cost of cash

There is a tremendous amount of cash sitting on the sidelines right now, particularly in short-term vehicles such as money market funds. As of early 2026, U.S. money market funds — a proxy for liquid cash that earns interest — hold more than $7.7 trillion in assets, up significantly from roughly $3.6 trillion in early 2019, representing more than 100% growth over five years.

For many risk-averse individuals, the fear that asset classes from stocks to real estate are overvalued has led to a cautious approach: holding cash, waiting for market corrections, or delaying major purchases like a home. But while patience can be a virtue, in today’s economic environment waiting with cash may be costing you money over time.

What is a money market account?

A money market account is a type of deposit account offered by banks and credit unions that typically pays a higher interest rate than a traditional savings account. These accounts are FDIC-insured up to applicable limits and may have minimum balance requirements or limits on certain transactions.

Money market accounts differ from money market funds, which are mutual funds that invest in short-term debt instruments and are not FDIC-insured. Money market funds have grown rapidly in recent years because they offer liquidity, relative safety, and competitive yields compared to ordinary checking or savings accounts.

Cash on the sidelines isn’t risk-free

Many Americans are keeping cash parked in safe vehicles like money market accounts or funds, waiting for a perceived “better entry point” into markets or real estate. However, cash does not have guaranteed value over time. Inflation — the general rise in prices — erodes the purchasing power of each dollar.

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Since the COVID-19 pandemic and the unprecedented fiscal and monetary responses that accompanied it, the value of the U.S. dollar’s purchasing power has diminished. Over the past few years, the dollar’s real purchasing power has dropped by roughly 11% or more, meaning that a dollar today buys notably less than it did just a few years ago. In this context, simply holding cash — especially in accounts earning minimal interest — results in a net loss of value after inflation.

Investment alternatives that have historically outpaced inflation

This is not to provide specific investment advice, but rather to highlight how different asset classes historically perform relative to cash.

Equities (stocks)

U.S. stocks — represented by broad market indices — have delivered long-term average annual returns of roughly 10 % per year over many decades. While short-term performance varies and is not guaranteed, stocks of established companies such as Amazon, Nvidia, Microsoft, Tesla, Alphabet (Google), and Walmart have demonstrated resilience, strategic positioning, and periodic returns that can outpace inflation and help preserve purchasing power.

Compared with cash earning below 4% in traditional savings or money market accounts, equities can offer greater growth potential over time, although with greater risk. Stocks held in brokerage accounts are relatively liquid, allowing investors to adjust positions as needed.

Real estate

Real estate is another asset class that often serves as a hedge against inflation. Even in markets that have softened, property values tend to appreciate over the long term, and rental income adjusts with inflation. An additional advantage of real estate ownership is the typical fixed-rate mortgage: borrowers lock in their principal and interest payments, which remain constant while rents and property values generally rise over time.

The U.S. housing market has been shaped not just by demand but by supply constraints. Since the Great Recession in the late 2000s, fewer homes were built relative to population growth, contributing to a persistent housing shortage in many regions. That shortage supports long-term value retention in residential real estate.

Moreover, a significant share of homeowners — over 40% — now own their homes “free and clear” without a mortgage, a record high as of late 2025. This trend is largely the result of older homeowners, especially Baby Boomers, paying off mortgages over time. Among those with mortgages, roughly half have interest rates below 4%, which is low by historical standards and enhances the fixed-payment advantage in inflationary periods.

Balancing safety with growth

Holding cash feels safe because it’s liquid and stable in nominal terms, but in real terms it can lose value as prices rise. That’s why many financial experts recommend a diversified approach that balances:

• Liquidity: Keep an emergency fund in cash or money market accounts for short-term needs.
• Growth assets: Allocate a portion of savings to assets that historically outpace inflation over the long term.
• Real assets: Consider ownership of property or other tangible investments that can preserve value.

This balanced strategy recognizes both the need for safety today and the need for purchasing power preservation tomorrow.

Ryan Richards is the growth director and a luxury real estate agent at Keller Williams Mountain Properties. He is the founder and co-owner of the Bunkhouse, Vail’s first and only boutique hostel.  You can find him at ryanrichards.com or 970-401-0720.