“Aussie shares have been pretty flat over the past five years. Should I sell mine and switch it all to cash?”

URRGHACKACK! Know what sound that is? That’s the sound Bart Simpson makes when Homer is choking him. It’s the same sound I made as I read this question.

Everything in cash? For Gen Xers? You cannot be serious!

Listen carefully. You can’t save your way to a fortune. You’d have to put away about 20 cents of every dollar you earned. Having a life? Nope.

Plus every dollar of interest earned is taxed at your marginal tax rate. You can get a return of about 6 per cent on cash at the moment. If you take out tax, the “average” worker only keeps 4.11 per cent. If you’re a high earner, you only keep 3.21 per cent.

Inflation is running at 2.7 per cent. Do you see where I’m going? The average investor’s “real” return from cash is 1.41 per cent and a high income earner has a real return of 0.51 per cent.

The only way to get a decent return from cash is through a mortgage offset or redraw account. There you’ll “earn” about 7.5 per cent. And it’s untaxed!

Over the medium to longer term, shares should earn around 9 per cent. Of that, about half will come through capital gains. Capital gains are generally taxed at a lower rate and unless you sell, you don’t pay CGT.

True, shares have been disappointing in recent years. But history shows that shares beat cash over the longer term. Gen Xers have time on their side. As Peter Gabriel sang “Don’t give up now”.

Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and a licensed financial adviser.