Ever since I knew what a dollar was, I was taught to save money. I remember walking into our local bank with my mom to open up my first savings account. In those days it was all done manually. I received a passbook with my initial deposit--I think it was $10. It was official; I had now entered the world of money. I felt very grown up.

The advice to save money has echoed from generation to generation throughout history.

My question is this: Is the advice to save money still good advice, given the dire economic straits we face today?

What's Changed?
Here are two things you may want to consider when asking this question.

1. The interest you are earning on your savings. Interest rates have been down for quite a while. I remember when Japan dropped the interest rates on savings to 2 percent. Many people here in the U.S. laughed and said, "That will never happen to us." Well, it has happened to us. In fact, you would be hard-pressed to find a savings rate at or above 2 percent today. Of course, Japan's interest rate dropped to zero.
   
   My girlfriend wanted to teach her two children about money the same way I learned when I was young. She took her son and daughter into her bank to open their first savings accounts. The difference between my first account and her kids' first accounts was that, after a few months, she noticed on the kids' bank statements that the fees the bank was charging to manage the accounts was greater than the interest her kids were earning. She realized that her two children were actually losing money every month. She quickly took her two kids back to the bank and closed both savings accounts.
    
2. The second, more disturbing factor to keep an eye on is the amount of money The Fed is printing. Why is this important to you? Many people have said that if The Fed keeps printing more and more money it will lead to inflation. In other words, your favorite brand of panty hose will cost you much more money in the future than it does today. Why would printing money lead to inflation? Here's my simplified explanation:
   
   Let's imagine that in the entire world there is $100. And in the entire world there are five products available. That would mean that, on average, each product would cost $20. The government decides to print more money, thus putting more money into the world economy. It prints an additional $900. However, that money does not go to create more products or to grow the economy. It is used to pay off debt and prop up failing businesses. So nothing new is created. Now instead of $100 in the economy, there is $1,000. Yet, there are still only five products available. Those five products are no longer $20 each; because of all the extra money available, they are $200 each.
   
   If inflation--high inflation--does occur, then it will cost you much more to buy the same items you purchase today. Instead of $3 for a loaf of bread, you may be shelling out $12, for example. That dollar you saved is now worth only 25 cents.

What to do?
So what's the solution? Do you stop saving money and just spend it all on new clothes and jewelry? That would be good for the economy but probably not healthy for your financial well-being. Do you put it all in the stock market and hope and pray the market comes back? Again, not a strategy I'd recommend.

I do save--for the short term. I save money as I am looking for my next investment. Once I find it, it's moved. You want your money always working for you. You want your money making you money, not losing you money. One solution is to look at where you can move your money so that it gives you a better return than a savings account. I believe that with a little time and effort most people today can find an investment that gives them more than a 1 percent to 2 percent return.

You also may want to look at what assets do well if inflation does occur and the U.S. dollar continues to lose value. For example, I like silver as a hedge against inflation. I am not necessarily recommending it for you, as I don't know your financial situation; I'm simply telling you what I do. Generally, when the dollar goes down in value, silver and other precious metals go up in value. Silver is also inexpensive. (The price today is $16.50 per ounce.) Silver is also a consumable. It's used in computers, cell phones, light bulbs, televisions, etc. Plus there's a limited supply of silver in the world--gold is actually more plentiful than silver. It seems to make sense that silver will go up in value over the years, especially with China, India and other countries emerging and demanding more silver.

The main point is that the advice that has worked for us in the past may not work for us today. The economy has changed and may never return to what it was. If you are waiting around hoping for things to "get back to normal," you might have a very long wait. We need to keep questioning the old advice and come up with new solutions, because I do believe this is the new economy.