Forget saving, it's time to invest

“If you want to get ahead and set yourself up for a good long healthy retirement. You need to start saving.”

See anything wrong with this sentence above? Makes sense right? We have to plan for the future now while we are still able to work so that one day we can kick back and enjoy all of our hard work that has paid off. So ayes. The sentence above seems accurate enough. There’s just one problem. If that was written about 40 years ago, there would be no fault. Today, however, things are entirely different. Saving is more like slowly losing at the moment and most of us have yet to realise it. The world has changed drastically and is set to continue to change and an ever-increasing pace. So why can't we save? And what is the better alternative?

1.) Interest rates are no longer in our favour

The number one reason why saving has become an obsolete waste of time comes down to the relationship between the interest rates that banks give us and the inflation rate.? Historically this relationship has been set up to work in a beneficial manner. Of course, there have been small periods when the inflation rate has been slightly higher, but for the most part, interest rates have always been able to triumph over inflation.?

What does this mean??

Previously when you put your money into a bank account, the value would increase based on the interest rate that the bank gave you. As long as this interest rate was above the rate of inflation, there was no issue, because gradually over time the amount of money and the buying power would increase.?

Here comes the problem. In the last few years and even more so since the start of the pandemic, the global average inflation rate has been higher than interest rates. So now all of our “savings” are slowly but surely losing their buying power. The inflation rate has just hit a 40-year high. Which might make you think “ Ok, so this has happened before”. Yes, but the strikingly important difference is that during the last peak interest rates were still higher. Now they are significantly lower and showing no signs of hopeful change any time soon.

2.) Earning potential vs. the cost of living?

We’ve just spoken about high inflation rates. The cost of living has increased tenfold in the last few decades. Everything is more expensive, from buying general goods to real estate. Remember how your grandfather told you how he bought his first home with one month's paycheck and a set of golf clubs? Well, that pretty much sums up the point perfectly. The gap between earning potential and cost of living is getting wider by the day. A combination of an increasingly competitive business world and inflation has critically stunted the growth of the average salary. When you combine that with the inflation rate over the same span of time it doesn’t take a mathematician to work out that our purchasing power is diminishing.?

So where is the solution? It's simple really. We have to beat the inflation rate.?

3.) Investing has changed too.

Before you start panicking. Stop. We are not all doomed. There are just a few changes that we need to make when we look at how we are planning for our future. First things first. Forget about saving. Just forget it. Remove the word from your vocabulary. Now replace that forgotten word with “investing”.?

How do we beat the big bad inflation rate? We INVEST. There are multitudes of different ways to invest and you shouldn’t let that intimidate you. It was not long ago when most people looked at investing to be reserved for men in smart suits on Wallstreet. Now practically anyone can invest. It doesn’t matter who you are, where you live, or how much money you have. There are risky high reward investments and there and long-term low-risk investments. You can even invest in real estate with not much at all.

So basically the world is your oyster. Yes, the days of saving are over, but the days of building incredible and diverse investment portfolios have just begun.