Why should you invest your savings?
You invest your savings to stay ahead of inflation. Without properly investing, your savings (in the bank or credit union) will end up being eaten up by the inflation monster. A dollar today will be worth 96 cents next year and if you earn 1 cent that still shows a loss of 3 cents. The compounding effect of that scenario can be devastating to a person’s financial future.
This is why we must invest and that means taking risk in the stock and bond markets. Stocks specifically have produced a return over time around 7% above the inflation rate, which means your 1 in the future will be worth more even after inflation with that compounding effect in your favor now instead of working against you.
Focus on investing wisely and at a low cost when implementing this basic idea. That means you own no-load index mutual funds that own entire markets all over the world at the lowest possible cost. A good start would be the Total Stock Market Index Fund at Vanguard or something similar within a 401(k) plan. Financial freedom to follow!
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