Short Term Savings: Your enemy to your long term wealth creation

Posted By: Admin

Humans have a need to feel safe and secure. This explains why we wear clothes, build homes among the many things. This is a feeling that man has had since he first walked the earth some 50,000 years ago. Today that same need for security drives people to do certain action, which is really counter productive in today’s day and age. Most people feel happy leaving moneys lying around in Savings bank and Current Accounts. They are always worried that there may be an emergency, expense, or outflow for which they may require these funds and hence choose to keep the funds lying idle in their savings account (earning 4% interest) or (current account earning ZERO interest). This at a time when inflation on daily life is about 7% or thereabouts.

Inflation robs you of your Purchasing Power!

Even a small household expense today will need significantly more money in the future to take care of, thanks to INFLATION. Today’s ₹20,000 per month house hold expense will need SIGNIFICANTLY MORE MONEY at 7% per annum (inflation) in the future.

It is therefore wasteful to keep money in savings account where it depreciates every day due to inflation. As per the illustration above, if you left your money in the bank for a 10 year period, you can only afford half of the items that you use today. So we need to get over the artificial comfort of seeing money in the Savings account and make that money sweat more than we do.

Steps to be manage funds efficiently:

Making investments through a monthly investments is the best way to create long term wealth that will help beat inflation and help you create a corpus to take care of future expenses.

THEREFORE LEAVING MONEY LYING AROUND IN THE SAVINGS ACCOUNT CAN ACTUALLY BE HARMFUL FOR YOUR LONG TERM WEALTH CREATION.

Here's "Why emergency fund should be your first investment?"