Why Saving Isn’t Always A Good Strategy

by Susan Paige on September 12, 2019 · 0 comments

Many people claim that having some money saved up is one of the best things you can do for yourself. For the most part, this is true. Having savings makes sure you’re always prepared for whatever comes your way. At the very least, it’s a prudent habit that can lead you to better things in the future.

However, saving money isn’t always an excellent strategy for a couple of reasons.

Inflation

Inflation is one of the biggest reasons why saving up your money may not be the way to go. According to statistics, inflation has been around between 1.8% and 3% for the last ten years. This means that unless your savings account is giving you at least a 4% interest, you’re basically losing money.

Inflation is a term that refers to the rate at which money loses value. The rate of inflation is due to several factors that are often outside our control. It’s often tied to the country’s performance, as well as the world economy. The rate of inflation can quickly make your savings irrelevant. Most savings accounts have very meager interest rates, which means that saving alone can’t be your end goal.

You could lose it all (either on a bad investment or an emergency).

The basic advantage of saving is also its biggest disadvantage – having a lump sum stowed away. Having money in savings can give you a sense of confidence because no matter what happens, you’re always going to be able to get yourself out of it. A case in point is a personal or family emergency.

The problem with having a lump sum, however, is that you can spend it all at once. While family emergencies are valid reasons to dip into your savings, other bad ones exist. A Ponzi scheme is one of them. Several people have been conned into believing in the benefits of a Ponzi/pyramid scheme. They dip into their savings to invest in the fantastic opportunity and end up losing everything in the end.

It can give you a false sense of security.

Having savings can also give you a false sense of security. Now, you may be thinking it’s not a bad thing. However, as we mentioned earlier, all it takes is one event to consume your savings completely. Having an emergency like that can be very demoralizing. Very often, it makes you feel like you’re back to square one and have to start all over again.

What’s the way forward?

As you can see, saving alone isn’t enough to give you financial stability. While it does have its merits, occurrences like bad investments, inflations, and even personal emergencies can wipe it all out. The best way is to combine savings with smart investments. We say smart because the wrong investment can be just as devastating as not having any investments at all.

Before making any investment decisions, you should go through a list of product reviews that talk about the best ways to invest your money. Some of them include reviews of the best stock and investment platforms, while others tell you about alternative ways to grow your wealth.

The bottom line is that saving isn’t enough. You have to combine it with investments. Also, you have to conduct intense research before you invest your money to get the best results.

For more of our excellent articles read these:

Yes, You Can Make Money As An Amateur Photographer.

Build Wealth On $600 Per Month

Nine Ways To Make Extra Money

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