How much money you should keep in a savings account varies on your own personal circumstances, but the general rule of thumb is to keep three to six months’ worth of expenses to serve as an emergency fund. But not every expert agrees with this, including Grant Cardone, author of the upcoming book “The Wealth Creation Formula.”
‘Every American Should Have No Money in a Savings Account’
When asked, “How much money do you think every American should aim to have in a savings account?,” Cardone gave an unconventional response.
“Every American should have no money in a savings account,” he told GOBankingRates. “The average American doesn’t have any money, so trying to have money in a savings account is not what people should have.”
Instead of focusing on saving money, people should be more focused on making money — specifically through passive income, Cardone said.
“What they should aim to have is passive income,” he said. “Americans should strive to have enough passive income, not earned income, to take care of all their expenses. So the goal is not to have three months of savings. The goal is to have three years of passive income that doesn’t require me to work, that takes care of my standards of living.”
Use Your Money To Earn More Money
While money in a savings account will earn some interest, there are better uses for those funds that will produce greater returns, Cardone said.
“I would convert my ‘save’ money into investments that provide me with passive income so that when we go into recessions, I continue to get income,” he said.
As for how to earn passive income, Cardone said there is no shortage of options.
“Anybody can have passive income,” he said. “You could write a book and that’s passive income. You could create an invention and that would be passive income. You could invest in real estate, that’s passive income. You could invest in dividend-paying stocks, and that’s passive income. You can loan money out to uncles, aunts, brothers, sisters and make sure they pay you back. That’s passive income.
“There are a lot of ways for people to earn passive income other than trading time for money, and that’s what I would tell people to focus on,” Cardone continued. “Focus on passive income being equal to your earned income to handle your standard of living.”
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