If you're a saver, you might have noticed your dollars in the bank aren't earning you much in the way of returns right now. Chances are, you're probably only getting around 2.5% interest, or a bit more if you're hunting around for deals.

With that in mind, it seems crazy that interest rates in Australia were at 16% back in the late 80's -- less than 30 years ago.

Source: Trading Economics

It's a similar situation in the United States, where the Federal Reserve has set interest rates between 1.25% and 1.50%. According to research from a Bank of England economist, they've been at the lowest they've ever been, in 5,000 years of civilization.  (It's pretty nuts to think there are interest rate records from Mesopotamia, circa 3,000 BC, right?)

Low returns for cash savers

While these low rates may have helped borrowers, when it comes to savers and retirees it's the opposite story.

When you combine low interest rates with inflation, cash can actually lose value over time.

In 2016, former Reserve Bank governor Glenn Stevens, warned of the increased pressure these low rates put on super funds and the impact they can have on Aussies' retirement savings. 

Growth assets come to the rescue

However, the good news is that in recent years the Aussie stock market and property markets have largely been going gangbusters. So, a common solution to the current low returns on cash, has been to invest in these growth assets.

And when people like Warren Buffett predict the Dow Jones will rise to over a million in 100 years, you can't help but be optimistic about the future. For reference, the Dow's currently at 25,803 (on 15 January 2017). 

Now that's some long-term growth.

Buffett tends to have a permanently optimistic view of shares and the US economy, which he outlines in his often-quoted annual shareholder letter and at the Berkshire Hathaway shareholder meetings (which frankly, look like a whole lot of fun).

Buffett's cash stash

As a self-made billionaire who started investing when he was 11, and with a personal fortune hovering around $77 US billion it might seem easy to be optimistic.

But what's interesting, is he still keeps a whole lot of cash on hand -- just a lazy $100 US billion or so. 

No doubt Berkshire Hathaway's a big company, but that's a whole lot of money to just have sitting around. Particularly when you consider the preference for the company is to hold only $20 US billion in cash.

Saving for a sale

So Buffett's got $100 US billion sitting in cash earning next to nothing. But he's a bloke who's optimistic, confident and skilled in investing. On a surface level, it doesn't make sense.

But Buffett's a step or two ahead. He's holding onto his cash, ready for a sale.

Not the Myer stocktake kind. The stock market kind.

Markets, whether shares or property, never go up in a straight line. The downturns, bleak times, fear or just disinterest, can present an opportunity to buy. Warren Buffet knows that sometimes you need to have a cash stash to take advantage of bargains when they come.

Happy money

And maybe Buffett also knows it's not always all about the money.

Joe Gladstone from the University of Cambridge, led a study that looked at the extent that money can lead to happiness. He found that the size of your bank balance, might be more important than your overall wealth, when it comes to happiness.

"The amount of money you have in your bank account right now is a better predictor of happiness than your aggregate wealth. Having more money in their bank account makes people feel more financially secure, which leads to an increase in happiness... It isn't just about maximizing your monetary benefit, but about maximizing your well-being."
- Joe Gladstone

Source: Wall Street Journal (11 September 2016)

So, should you keep cash on hand or should you invest? You can see it's a bit more nuanced than a simple yes or no answer.

Whether it's your happiness at stake, or a strategic move to take advantage of future opportunities, having a bit of cash can be a good thing.