Diversifying Into Other Currencies

Why Is the Dollar Falling?

The U.S. dollar has been going down for a number of different reasons. One key reason is that the Federal Reserve has been printing more money and expanding the money supply, which dilutes the value of existing dollars.

So how can you protect your savings from eroding because of a declining dollar?

There are several things you can do.

Diversifying Into Foreign Currencies

One thing you can consider doing is putting a portion of your savings into a foreign currency that's stronger than the dollar. By diversifying into other currencies, you can reduce your risk and exposure to a declining dollar. If you convert a portion of your savings from U.S. dollars to, say, euros, and the dollar declines relative to euros, you come out ahead.

But diversifying your savings into other currencies isn't without risks. If you put a portion of your savings into euros and the U.S. dollar were to go up relative to the euro, you'd lose money when converting your savings back into U.S. dollars. Also, keep in mind that other currencies are fiat currencies like the dollar and can lose value over time as their central banks print more money. Nonetheless, diversifying a portion of your savings into other currencies can be a way to reduce overall risk.

A U.S.-based bank that lets you keep your savings in the currency or currencies of your choice is EverBank. This bank offers money market accounts as well as certificates of deposit denominated in other currencies.

There are many other ways to hedge against a falling dollar. To learn about one other strategy, read this piece on how to invest in gold.

Cha-ching! That's all for now, courtesy of Money Girl, your guide to a richer life.

As always, everyone's situation is different, so be sure to consult a tax or financial advisor before making important financial decisions. This podcast is for educational purposes only and is not intended to be a substitute for seeking personalized, professional advice.