Savings vs DCA Calculator

Leaving your money in a High-Yield Savings Account (HYSA) or Certificate of Deposit (CD) might feel safe, but it often carries a hidden risk: inflation drag. While your nominal balance grows by 4-5% APY, the cost of living (inflation) typically rises at 3% historically, and sometimes much higher. This means the real purchasing power of your cash barely grows.

What is Dollar Cost Averaging (DCA)?

Dollar Cost Averaging (DCA) is a strategy where you invest a fixed amount of money at regular intervals (e.g., every month), regardless of whether the stock market is up or down. By investing automatically into diversified vehicles like S&P 500 index funds or a 401(k), you buy more shares when prices are low and fewer shares when prices are high.

Historically, the US stock market has delivered an average annual return of roughly 10% before inflation. While it experiences short-term volatility, a long-term DCA strategy takes advantage of compound growth, significantly outpacing the returns of fixed-income savings accounts.

The Opportunity Cost of Cash

Use the calculator above to see the staggering difference between a 4% savings rate and a 10% index fund return over 20 years. That difference is the opportunity cost of holding cash. While everyone needs an emergency fund (usually 3 to 6 months of expenses) kept in a highly liquid and safe savings account, parking long-term retirement wealth in cash is statistically one of the most dangerous financial decisions you can make.