Presenting Investor Education Originals, where we simplify the basics of personal finance and investing for you. This video explains the difference between Savings and Investment and explains how to make your money work for you.
Let’s say you are a hard-working person who earns reasonably well, is happy with your lifestyle, and manages to save about 20% of income every month.
Now, let’s fast-forward to your retirement: you are ready to enjoy retirement and dip into your savings. Turns out you haven’t got all that much, although a colleague of yours with the same income has everything covered.
You wonder why – both of you worked just as hard, earned the same, and saved the same! So how did he end up with more wealth in his retirement than you?
It’s quite simple. While you were regularly saving your money, your colleague was busy putting it to work, i.e., Investing.
Now that you know where you went wrong, let’s figure out how you could have saved more for retirement by simply investing regularly. You may ask – How to invest money? Where to invest money?
You have to begin with savings. Then redirect those savings to investment plans that align with your goals and risk appetite, to start building wealth. How does one start building wealth?
Saving is not enough because you also need to account for inflation. Investing gives clear direction and purpose to your savings, so your retirement goals don’t seem too far-fetched.
The best way to convert your savings into investment is to get into the discipline of investing. Saving & investing regularly and religiously over a long period, no matter how little the amount.
Be mindful of your expenditure. Invest with a clear goal and a definite path to your dreams. Remember these three points to become a better investor:
1/ Saving is what you are left with after accounting for all the expenses whereas investing is the process of growing your savings.
2/ It is possible to beat Inflation by investing smartly.
3/ Start by controlling your expenses to generate savings, and then turns those into investments.
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