Top 4 Reasons Why Investing Is Less Risky Than Saving Your Money

Investing is Less Risky than Saving

Investing is risky business (just like Tom Cruise, so I’ve heard). But saving is risky business as well and I believe it’s even more risky than investing.

I’ll give you four reasons why investing is less risky than saving.

1-More Purchasing Power

We always want more power, right?! Kind of like how Wonder Woman increased her power over time. In the beginning of the movie she didn’t know how much power she actually had and had to continue to develop, or increase, that power over time. I just saw that earlier this week, super wonderful in case you were wondering. Ha, alright, I’m done with the cheesiness. 🙂

I’m not talking about power over other people, but the power to be more self disciplined or the power to handle uncomfortable situations more effectively, that kind of power.

We also want to keep increasing our purchasing power.

Purchasing power is the ability to buy things with less money, not more money.

Over time, money becomes less valuable. It’s because of a little thing called inflation.

The value of money decreases about 3% each year.

So, if you have all of your money in a savings account that’s only earning 1%, over time the value of your money is essentially decreasing.

It’s not keeping up with the 3% inflation because it’s only earning 1%. The longer you keep your money in there, the more your nest egg will shrink relative to what it can buy you.

You’re not outpacing inflation so there’s no way your money can grow.

Now, of course, savings has it’s place. It’s great if you’re saving for a short-term goal, but for the long-term it’s not the best idea because it’s not even keeping up with inflation.

2-Investing at the worst times still makes you more money.

I know it’s not easy to start investing in the stock market. There could be a fear you’ll lose your money. That’s understandable, nothing is a guarantee.

That being said, Schwab did a study where they looked at different times to invest in the stock market, plus just leaving the money in a savings account.

If you invested your money in the stock market at the worst times possible (when prices were the highest) every time you invested, you would still have more money than if you left in a savings account. (Bar 4 vs bar 5 in the chart.)

Market Timing

(Source: http://www.schwab.com/public/schwab/nn/articles/Does-Market-Timing-Work)

Investing in the stock market is risky, but over the long-term studies show you’ll be more likely to make more money than you will by leaving your money in a savings account.

3-More likely to reach long-term goals.

If you see the money just sitting there, you may be more likely to spend the money.

If you have a large sum of money in your savings account, it’s easily accessible to you which means the likelihood of spending that money goes up.

If your money is in a retirement account or a separate brokerage account, it’s not as easily as accessible.

Seeing that money in savings could be tempting to spend it on something that would cause instant gratification, but not be best for your long-term goals.

It may seem like a lot of money just sitting in your account so you could just be thinking you need to put that money to some use and spend it more frivolously.

If you have your money invested in an IRA or another retirement account or in stocks or different funds, it’s a lot easier to not spend that money because it’s there to help you reach your long-term goals.

4-Increasing your chance of reaching financial freedom.

Being able to have financial freedom (retire) is something that’s on a lot of people’s minds, but a lot of people underestimate what they need to be investing in order to reach financial freedom.

There’s lots of different online calculators out there you can use to determine about how much you should have invested before you reach financial freedom.

It could be anywhere from $1 million to $3 million, or even more.

That’s a significant amount of money and it’s likely you won’t be able to save that much money which is why it’s important to invest the money you do have and take advantage of compound interest.

Compound interest is where you are earning interest on interest, which adds up exponentially over time.

It’ll be more likely you’ll achieve financial freedom if you’re investing instead of just saving.

Well, now that we’ve covered the reasons why it’s important to be investing your money instead of just saving your money I bet you’re wondering, well Tiff, how do I invest? I have all the steps to getting started investing in my course, Stock Market Investing Made Simple, which you can check out here.

Are you ready to start investing?? Share in the comments below!

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