It is expensive to store majority of your assets in cash, because it is a non-interest-bearing instrument. The main reason why we keep cash on hand, is because we need it to pay for daily expenses (eg. food, transport, utilities, entertainment).
Money on hand is important. Everyone should aim to increase the amount of available funds, that can be easily converted into ready cash. One of the most effective ways of doing this, is through a savings account. The money accumulated in savings provides an emergency fund, that can be tapped if money is needed.
However, most saving accounts do not give a high enough interest to offset the inflation of goods and services.
For example, in 20 years, the cost of a university education could easily be $40,000 a year. Will a young couple have sufficient current income or savings to meet this expense for their children? They may not, unless they start investing some of their money today.
Therefore, it is crucial to invest a portion of your savings for potentially higher returns. It is very difficult to achieve many major personal financial goals without investing.
Some people have more specific reasons for investing. Some make investments to supplement their current income. Others invest to accumulate enough money to buy a car, a new property, send their children to university, or to retire comfortably.
An investment can mean different things to different people. The range of investment types range from fixed deposits, to stocks and bonds, to property and collectibles. Basically, any asset that is purchased primarily in expectation of earning a monetary reward can be considered an investment. What’s important is that you choose the right type of investments that suit your risk profile and time horizon.
If you need advice on investing, please contact your trusted FLA Organization financial planner today.
