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- I've always dreamed of going to Italy, and after years of saving, I finally saved up enough money.
- But when the pandemic hit, I postponed my trip and my travel funds were placed in a high-yield savings account.
- Since interest rates are low, I thought I would invest in the market and earn more. I was wrong.
I have dreamed of going to Italy for most of my life.
When I was a kid, my dad showed me slideshows (like the old carousel) of his two years of church missions and business trips. I was fascinated by the sculptures, frescoes, and breathtaking architecture. I read Pain and Ecstasy during my senior year of high school and studied the Renaissance in European history. And I was completely hooked. Italy was at the top of my bucket list.
It wasn't until I was 35 that I actually started saving for the trip. My family was in a tough financial situation at the time, but one day I looked around and realized I had to start saving money for this long-held goal. , Someday I'll die dreaming of Italy but never going there. The thought was terrifying. So I found an old coffee can, poured some change into it, and labeled it “Italian Fund.”
Soon after, we moved to Texas and got a new, more stable job. Things started to look up for me financially, and a few years after my first coin went into my coffee can, I had about $1,200 and enough airline and hotel points to take my husband and I to Italy. I was able to collect almost everything.
By this time, my Italy fund had transitioned from canned coffee to an online high-yield savings account. He was earning 1.05%, the highest interest rate of any savings account I could find at the time.
The itinerary was planned, dates were chosen and childcare arrangements were made. Then the pandemic hit.
I transferred my travel money to the stock market in order to earn more money.
When the news broke about how bad the coronavirus case numbers were in Italy, my husband and I canceled our trip in 2021. As time went on, lockdowns and restrictions were firmly in place and we knew it was going to be pretty tough. It will take some time before you feel comfortable traveling abroad.
I continued to indulge my pent-up wanderlust while watching the stock market rise to unprecedented levels. My IRA grew exponentially, but the Italian funds sat alone and unused in my savings account.
Then the financial FOMO started. This is what I thought. “This is stupid. Why not put my Italian money in a brokerage account and earn a double-digit profit instead of 1% of the “top” on the stock market? That way, you'll have more money to spend on gelato once the pandemic is over. ' It made a lot of sense at the time, but I soon realized what a short-sighted decision it was.
I moved the contents of my high-yield savings account into a brokerage account and bought some stocks and ETFs that were rising in value during the pandemic. These include Tesla, Pinterest, and the technology-focused ARK fund. (I'm cringing as I write this.)
I lost money when the stock market started crashing
Once COVID-19 restrictions started to ease, I started looking into flights and hotels to plan my trip again. However, when I checked my brokerage account, I found that I had less than half of my original funds. Tech stocks took a big hit after the pandemic, so I put most of my savings into them. Between February 2021 and October 2022, I lost $665. That's a lot of gelato.
jennifer sisson
I made the rookie mistake of putting my short-term savings into long-term savings vehicles. I was raised by parents who traded options and am a personal finance writer by trade, so I don't have a good excuse for this. I thought it would be smarter than taking my vacation money, money I knew I would spend over the next two to three years at most, and investing it in growth stocks that were designed to be held for at least five years. I made a hasty decision based on two emotions you should never listen to when it comes to investing: greed and fear.
Should I sell the securities I currently own (securities that I truly believe will do well over the next few years) and cut my losses, or risk watching the Italian fund dwindle further? We are faced with an unpleasant choice. I still don't know which poison to choose.
Despite rising interest rates, so-called high-yield savings accounts are only slightly more attractive than they were two years ago. The same online bank I currently use offers higher interest rates on savings accounts, but some of that gain is dwarfed by inflation.
But high-yield savings accounts have one important benefit: You won't lose your money. You may not make double-digit profits, but you won't lose either. And not losing is much more important than winning for short-term savings.
Although the profits are low, I will definitely use a high-yield savings account for my future savings in Italy. At least it's an upgrade from canned coffee.
This article was originally published in October 2022.
