Are Savings Safe?
Savings is a pool of cash kept aside. It’s great since you can do whatever you want to do with it (It’s a liquid asset!). However, when the interest on savings is lower than the inflation rate, the value of the money decreases over time. Also, tax will be charged for interest earned unless you shelter it. You might constantly lose money by not doing anything. For these reasons, savings might not be as safe as you think.
Taking Risks Is Really Worth It?
People invest to grow money and possibly generate more income. In the long run, the value of your investment is likely to outpace the money in your savings account.
History has shown that for the past 50 years, S&P 500 (an American stock market index based on the market capitalizations of 500 large companies) gives an annual average return of 11%, whereas an average savings interest rate is 5%.
Start Investing Smart
Most advisors will say you should plan out your life to make long-term investments except not all of us can predict our future. Life happens. Perhaps the best way is just to do it NOW with a couple of spare hundred dollars every month. Once you start investing, you will want to know about more how to do it better.
One condition: you shouldn’t be carrying high interest debt. If you are paying 20% interest to your credit card debt, pay it back first. Not many investments can guarantee you 20% return.