Cash Equivalents Risks and Rewards

Savings deposits, CDs and money market accounts are insured by the Federal Deposit Insurance Corporation (FDIC), a federal government agency, for up to $250,000 per depositor. Money market mutual funds are not FDIC insured.

A big risk to cash equivalents is inflation. If inflation occurs at a higher rate than what you are earning from your cash equivalents, your money loses its purchasing power. For example, if you earn 1% from a savings account and inflation is running at 2%, your money isn't keeping up with the rising cost of goods and services. A deposit of $100 in your savings account will grow to $101 by the end of the year, but an item that costs $100 today will increase in price to $102 over the same time period.

AARP Financial Inc. does not provide tax advice. Please consult a tax advisor for information pertaining to your particular situation.

The information and content provided herein is general in nature and is for informational purposes only. It is not intended, and should not be construed, as a specific recommendation, or legal, tax or investment advice, or a legal opinion. Individuals should contact their own professional tax or investment advisors or other professionals to help answer questions about specific situations or needs prior to taking any action plan based on this information.

The Financial Advisors are investment adviser representatives of AARP Financial Inc., an investment adviser.

While AARP endorses the services provided by AARP Financial Inc., AARP does not offer financial products or services itself and cannot recommend that you or any specific individual should purchase any particular product or service. AARP Financial Inc. is an investment adviser and a subsidiary of AARP.