Final answer:
The two main disadvantages of using savings accounts over investing are the lower potential for growth due to low rates of return and the inconvenience in accessing funds quickly for immediate expenses. Savings accounts offer safety and are FDIC insured, but they may not be the best for growing wealth over time.
Step-by-step explanation:
Two disadvantages of putting your money into savings accounts compared to investing are a lower rate of return and liquidity issues for immediate spending. Firstly, savings accounts tend to have a low rate of return, which means that over time, the money may not grow significantly compared to investments like stocks, bonds, or mutual funds. Additionally, even though savings accounts are often lauded for their liquidity, in practice, there might be inconveniences such as the need to go to the bank or an ATM to withdraw cash, which can make funds in savings accounts less accessible for on-the-spot transactions.
Another vital aspect to note is the role of the Federal Deposit Insurance Corporation (FDIC), which insures deposits up to $250,000 in the case of bank failure. This insurance provides a safety net for funds in savings accounts and contributes to their low-risk profile. However, this safety and ease of access are traded off with the opportunity for potentially higher gains through investments.
Therefore, the overall comparison of savings accounts to investing options weighs heavily on individual financial goals and risk tolerance.