2 hyper-important reasons why you should invest your money rather than save it

2 hyper-important reasons why you should invest your money rather than save it

Hey, so what is your plan for your money? You have a decent salary that can cover your monthly expenses. You can also get yourself the stuff you want from your favorite brands. Financially you’re doing great, or at least better than before. However, there is a tiny nag in the corner of your mind. You’ve heard people say that you should be responsible with your money. You should save for the future. You’ve probably even had lessons about it in your school textbooks. You’ve also seen others around you struggle in life because they didn’t save for the difficult times. So, while you are having a good time buying stuff and hanging out with friends, you keep wondering and perhaps even feel guilty that you aren’t saving enough.

But wait. True. You shouldn’t be blowing your money all at once. You should, a hundred per cent, be setting something apart for the future. However, is saving money really the right option for you? What is the use of saving money? How about investing your money instead? What can investing do for you and how is it different from saving? If you’re asking these questions keep reading.

Saving and Investing are not the same things:

Well, even though people use the terms ‘save’ and ‘invest’ interchangeably when it comes to financing terminology, they tend to mean different things.

Saving:

Saving, especially after the industrial revolution, refers to putting your money in a bank for a short period of time like say a few weeks to around 5 years.

The aim of saving money is to achieve some sort of short-term goal like say you want to buy an iPhone or go on a vacation. For older folks, it could be the down payment for a family car or a flat.

A simple savings account, fixed deposits and recurring deposits are some of the common means you have to save money. But there may be other nation-specific schemes like the post-office savings scheme in India.

The thing about savings: you’re liquid i.e., you can use your money to buy stuff super-fast. With a savings account, you can take out your money anytime. With a fixed deposit, you’ll have to wait for however long you’ve locked your cash.

Saving is very low-risk. When you put your money in a bank, you’re pretty much assured you’ll get your money back with interest. Rarely does a bank go bankrupt. And even if it does, you’re still protected by deposit insurance.

Investing:

Investing generally means you’re putting in your money for longer periods into a non-banking financial institution like the stock market or mutual funds.

The aim of investing is generally long-term gain like retirement planning, buying a big house after 10 years, children’s college education, marriage and things like that.

Traditionally, investments are not liquid. People mostly lock in their money for 20 years or so. But here’s the good news. Today there are many great ways you can get all the benefits of investing and still be liquid! More good news. There are also some amazing alternative investment options that have been doing well that even accredited investors are getting into. Check out CrowdCandy. You can invest in super liquid NFTs!

And, usually, people say that investing is risky. This is the primary reason why people prefer banks to the stock market. People are just too scared of losing money. However, is this true?

If you pay attention to the investment scene and give it an honest analysis, you may well be able to see that this fear is chiefly because of a lack of knowledge about investing. It is founded on ignorance and prejudice rather than on scientific consideration and reasoning. It’s not because investment is a tight-rope walk.

There are numerous ways of investing wisely and reducing risk. Now the question is, of course, why you should invest and how it is better than saving. Below are 2 hyper-important reasons why you, as a young person, should invest rather than save.

Super profits:

How much interest can you earn when you go in for a bank? Check the interest rates banks are offering in your country. Now do a careful analysis and see, if it is worthwhile putting your money there. Long-term. When you invest your money outside banks you can easily make profits from 10–25%!!

So, what’s the risk here? Say you put all your money into the stock market. If the market crashes, best case scenario, your shares are going to be devalued for a few years. Worst case: you lose all your money.

However, this isn’t really much of a risk if you diversify. You take the amount you want to invest, divide it into portions and buy different kinds of assets through reputable sources. Some of it you can put in banks too. In this way, you’re making it safer for yourself while also getting those high returns that only investing can give you.

Plus, the rule in investing: young people should go for riskier investments. This is because even if your investments take a hit, you still have time to recover. This privilege is not available to the elderly.

So, shake off your fear of and prejudice about investing and start developing a positive attitude towards it. Be wise. Investments = higher returns.

Beat inflation:

Inflation. A word that’s menacingly on the news every day. What is it? You can think of inflation as the increase in the prices of goods and services. Why is it important? Say you put your money in a bank at an interest rate of 5% but prices increase by 6%. The net effect: you’ve lost 1%. Now if you’re paying taxes on your gains, you’re losing a lot more. That’s right. Instead of making your money grow you’re making losses.

This is even more important after the pandemic. World over, majority of the countries injected what you call fiscal stimuli. This has caused prices of commodities to rise and in many countries to worrying levels.

So that’s another reason why you need to invest rather than save. When your money is growing faster than price rise, you’re beating inflation. This is why people who invest are better off than those who save. And as a youngster, you should surely be putting a proportion of your money into an investment portfolio.

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