A 36-year-old who learned to invest like Warren Buffett explains how saving can cost you money

If you’re just saving and not investing, you’re setting yourself up to lose money in the long run. That’s a lesson Danielle Town, author of “Invested: How Warren Buffett and Charlie Munger Taught Me to Master My Mind, My Emotions, and My Money (with a Little Help from My Dad),” learned the hard way.

When Town, then 34, found herself burnt out as a corporate attorney, she started brainstorming ways to retire faster. “I started to think, ‘What else can I do to support myself without being dependent on my salary?'” she tells CNBC Make It.

Her first instinct was to hoard as much cash as she possibly could.

“What I was doing was saving money, which I thought was genius,” she says. “And I felt very comfortable with my money, figuratively, under my mattress, just protected, and careful, and safe.”

As she writes in her book, “it wouldn’t grow much, I knew, but it wouldn’t get smaller either.”

But after talking with her father, author and investor Phil Town, she realized that keeping money long-term in a place where it wasn’t growing would leave her with less in the end, thanks to rising inflation rates.

“Now, I realize that to some people who know about financial stuff, this sounds ridiculous,” she says. “But I didn’t know anything about financial stuff. I knew inflation was a thing that felt very macroeconomic, but I had never connected it to my actual savings.”

In reality, she found, she was “losing money through doing nothing.”

What happens is that inflation causes prices to rise, which makes money less powerful over time. While a $20 bill will always be worth $20, what you’re able to buy for that amount dwindles.

If you had stuffed $1,000 in cash under your mattress 50 years ago, today it would have the same buying power as only $137.45 did in 1968.

However, that same amount invested with compound interest would have grown to about $20,000, assuming a 6 percent rate of return. Even if you only earn a 4 percent rate of return, it still grows to around $7,000.

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Dedicating a solid chunk of money to savings for the future should be a key part of anyone’s financial plan, but that money shouldn’t sit around gathering dust. Town’s father breaks it down in the book:

The people who encourage saving mean that you should save instead of spending money. But because of inflation and the fact that what people buy will be more expensive ‘tomorrow,’ people spend all of their money and whatever they can borrow ‘today,’ so we need to be encouraged to save instead of spend. Nobody is saying, once you’ve saved some money, to keep it sitting in a savings account.

Rather, it’s smarter to put that cash to work. “The antidote to losing money on inflation is investing,” says Town, now 36. “You’ve got to do something with your money.”

Town chose to make investing a daily habit and researched specific companies to put her money in, but there are plenty of alternatives. Here are a few simple, low-stress ways to start investing:

Sign up for your employer’s 401(k) plan and take full advantage of any company match, which essentially gives you free money.
Contribute to a Roth IRA or traditional IRA, which are both individual retirement accounts that offers tax breaks.

-Use micro-investing apps such as Acorns, which help you begin by investing small amounts of your “spare change.” The app rounds up your purchases to the nearest dollar and automatically put your coins to work.

-Try other apps that aim to make investing simple and accessible.

-Consider automated investing services known as robo-advisors that can help you out no matter how much you have in the bank.

-Research low-cost index funds, which Warren Buffett recommends.

|CNBC

Get Danielle Town’s Book “Invested” Here