‘Dead money’: Your savings account is losing a fight with inflation. Here’s where 3 financial advisors put cash instead

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Inflation has cooled a bit, but that doesn't mean Americans can stop worrying about their purchasing power.

Consumer prices rose 3.4% in July from a year earlier, down slightly from 3.5% in June, according to the latest data from the U.S. Bureau of Labor Statistics (1). But paychecks aren't necessarily keeping up: After adjusting for inflation, average hourly earnings fell 0.2% over the year (2).

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So, while workers may be making more dollars on paper, those dollars aren't quite stretching as far as they did a year ago. And that can be especially frustrating if you've got a pile of cash sitting in a savings account.

After all, earning interest doesn't necessarily mean you're getting ahead. If your account is paying less than the inflation rate, your money may be growing in dollars while quietly losing purchasing power.

For savers, the challenge can be even more frustrating. If your savings account is earning less than the rate of inflation, your money is effectively losing value over time.

It's also worth noting that inflation is still running well above the Federal Reserve's 2% target (3), even if some of the pressure has started to ease. The latest data show the Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, rose 3.7% in July from a year earlier. Core PCE, which leaves out food and energy prices, was up 3.3% (4).

It's a long way from the Fed's 2% goal — and another reason savers may want to think twice about leaving large amounts of cash sitting idle.

That's why some financial advisors are rethinking where they keep their own cash. While many still prioritize safety and liquidity, they're increasingly looking for places that can help preserve purchasing power instead of letting savings become what one advisor called "dead money (5)."

Advisors are cutting expenses before touching their investments

Andrew Fincher, certified financial planner (CFP) at VLP Financial Advisers, told MarketWatch, "Inflation has definitely changed the way many people think about day-to-day spending and long-term planning (5)."