Like many others, you may hear a lot about the importance of investing money but not understand why it is important. Investment is an option that does not resonate with people who are only familiar with savings accounts, which really are forms of investment that are not immediately apparent to everyone. However, you should invest money to make it work for you and eventually relieve you of the need to work for it.
Simply leaving your money in a savings account will never do much for you. At today’s rates of interest, you might as well keep your money in a mattress. The interest rate on a savings account is not keeping up with inflation. Unless you are paid a great deal of money and spend almost none of it to maintain yourself, you will never earn enough to live off your savings deposit someday.
When you invest money to make it grow faster, you generally want to put it into stocks, commodities or other financial instruments that are not bound by an interest rate. It may seem wonderful and generous for a bank to give you back 2% of your money every year. However, you should know that the bank is making a lot of money off your deposit. The bank employs people who invest money to make its own profits in land and stock deals. Wise investors simply skip the bank as a middle man and invest their earnings themselves.
If you choose to invest money to make your deposits grow faster, you can select stocks that seem likely to grow or to produce dividends. Stocks that grow in value may give you much greater returns than a savings account. For example, it is not unheard of for some stocks to gain 10% or even 20% in a single year. Dividend stocks actually send money in the mail to stockholders on a regular basis. If you own enough of these stocks, you can live off these checks as income. Many investors take some of these earnings and invest them back into stocks.
When you invest money to make it accumulate value faster, you do have to remember that you take risks. A bank offers a very low interest rate but that growth is guaranteed. It is always possible that your stock investments will lose money. However, careful choices can ensure that most of your stocks will earn money.