Before we get into the many reasons of investing, it’s important to know what the hell does investing means??? I think there are many ways people use that word: “I wanna invest in myself”, “This frying pan will be a good investment”, “Buying this house is a good investment”.
In terms of the definition of “invest”, yeah it can mean a lot of things. But for the sake of my blog, for this post, we will put the meaning of invest as “using money to make money”.
Note: Before you start investing, do remember to build your emergency fund first! Click here to read more on what is an emergency fund.
There are many ways to invest. I think it is impossible to explain it all in a small article, so I will list down a few ways for now.
The list is endless. The returns on an investment varies for different types. And the risks is something to keep in mind.
With that, let’s dive into the reasons why YOU should invest.
Inflation is something we hear maybe a few times every year and we’ll be like “Yeah, inflation is going up and prices are going up”. Inflation can be explained as you are able to buy lesser things with each dollar you have over time. Inflation in Singapore is not as bad as other countries, it is still there. Take a look at the picture below:
On average, since 2000, the average annual inflation rate has been 1.57%. This means that the things you buy increases an average $1.57 per year.
So investing your money can be a way to keep inflation from eating into your savings. Note: investing isn’t the only way to do this, maybe I will write another article on this soon!
I personally feel that everyone should have multiple sources of income. They can be a backup for you in case you lose your primary job or your income drop. When you invest your money, you will get the returns yearly, which can contribute to your income. You will have to work hard for at the start, but after a while the money will keep flowing in without you giving a thought about it. Think of yourself as a table and your sources of income as the legs. Would you have 1 leg only or multiple legs? You decide.
I think we all have dreamt of getting rich, or living life without working. I’m not saying just investing money will get you there, but it will be a way to grow your wealth. Let’s see the example below:
As you can see, if you were to invest just $5000 per year with a returns of 5%, you would have more than $165k. This is just an example of course, it can be more if you want it to be!
If you’re like me, someone who’s in your early 20s, you might think retirement is still in 40 years and still a long ways to go. But I think time pass very fast and it 40 years might be quite a short time. By investing early on also, you will be making use of compound interest which is something very powerful. Anyway, if you’re like me, I wanna “retire” as fast as I can and enjoy life afterwards.
Personally, I feel investing is something everyone should do, young or old, rich or poor. Some people may invest a lot, some may be a little. But it is important to at least invest something. Start today by doing a little research!