Did you know there is a distinct difference between saving and investing? Knowing the difference could earn or cost you thousands (maybe hundreds of thousands) in real money! Saving is putting your money in a bank – nice and protected – but not growing very much. Investing is putting your money into places that make those dollars recruit more dollars to earn wealth. Investing comes in many forms – choose a path that works for you and start the moment you have eliminated your consumer debt. Check out this video to see an example of how savers are losing in the wealth building game!
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I am a financial coach that focuses on improving personal finance behavior. I do not sell investment products or manage investments.
If you think you’re getting ahead by Putting a lot of money in the bank I got news for you [Music] What’s up everybody welcome to the Achieve financial coaching channel where We believe in breaking The chains of debt and talking about all Things related to personal finance Today i want to talk to you about why People that put money in the bank Or in shoe boxes or Under the mattress while you all are Absolutely losing Out on the opportunity to have that Money working for you I had a conversation with a buddy and he Talked about how his mom gave him Sound financial principles when it came To living below your means And you know just not spending a lot of Money but Saving a lot of money but we also Started to talk about how She missed out on the opportunity to Make that money work for her And so today i want to make sure that Doesn’t happen to you By walking through a simple example Please subscribe to the channel like the Video share with friends and drop a Comment Let’s get started so there are two Concepts i need you to understand
As we walk through this example today The first concept is called inflation Inflation is a general increase in Prices and fall in the purchasing value Of money Happens every year averages about three Percent so basically something that Costs You know of one amount one year the Price is going to go up by on average Three percent the next year And then purchasing power purchasing Power is the amount of goods and Services That can be purchased with a unit of Currency what a dollar buys you today If the purchasing power of that dollar Decreases it will buy you less tomorrow So let’s just take a quick example and Look at how inflation Impacts your purchasing power if you are Just saving money So you work hard and you are smart you Live below your means and you want to Save your money you don’t invest it you Don’t know much about investing You just stick your money in the bank so You have one dollar that you want to put In the bank The bank says thank you for your one Dollar and to reward you for Putting your dollar with us we are going To give you a whopping one percent Um every year on that money if you leave
It with us so every year your money will Gain one percent So let’s look at what your money how Your money grows Over a period of four years so in year One you start with one dollar The bank gives you one percent on that Now you at the end of the year you have A dollar and one cents Year two you now have a dollar in one Cent starting remember you made one cent Um in the last year so again one percent From the bank Leaves you with a dollar and two cents At the end of year three you now have a Dollar and three cents you’re pretty Much Just gaining a penny every year and then In year four You now have a dollar and four cents so After four years you now have a dollar And four cents if you leave your money In the bank because the bank has been Paying you one One percent every year so dollar and Four cents now let’s look at that bank Interest rate of one percent versus Employee inflation Which we know is on average or at least For the last 20 years has been about Three percent and what it does to the Price of goods And what i want you to understand and Think about is how if you’re only saving
Money Right and not investing how in reality What happens is that interest rate is Not even That the bank is giving you is not even Keeping up with inflation so you’re Actually Losing purchasing power every year and This is why i say Savers are losers so if we look at this Comparison In year one remember the bank gave you One percent you had a dollar and one Cents After you started with the balance of a Dollar right well Let’s use this example and talk about Maybe the cost of bread Right let’s use bread as the example and So bread costs a dollar At the beginning of year one so at the Beginning of year one you can actually Buy that bread you can afford it You have a dollar bread costs a dollar And You’re good you can buy bread for your Family well as the year goes on and the Inflation rate gets applied to that food At the end of the year bread actually Costs a dollar in three cents so you Could afford it in january But not so much so in december so let’s Just look at what happens over the years Remember you’re only gaining about a
Penny A year from your bank interest but that Three percent keeps getting applied to The cost of bread Every year so at the beginning of year Two bread costs a dollar and three cents You apply that three percent inflation Rate it’s a dollar and six cents now So your purchasing power is just Dwindling You’re not even keeping up with Inflation again this is why savers Are losers you can’t even keep up with The cost Of bread or everyday elements by Sticking your money in the bank Then at the end of year three bread is a Dollar and nine cents you have a dollar In three cents and by the end of year Four Bread costs a dollar and 12 cents and You in your bank account Your nice savings account you have one Dollar and four cents so bread And inflation being applied to the cost Of bread has Outpaced what the bank is doing for you And remember Most banks aren’t even given one percent They’re giving a lot less than that So you are really your purchasing power Is really dwindling the longer you keep Your money In a bank account in a savings account i
Hope after walking through that example You understand what i mean when i say Savers are losers you are losing the Opportunity to have that money Work for you now listen i want you to Have an emergency fund That’s before you ever even start Thinking about investing your money into Anything so three to six months of Expenses In a nice safe boring savings account You want to do that After you have done that though and After you have No consumer debt maybe all you have is a Mortgage you want to then make sure you Are putting your money In places that will grow and work for You you’re putting it in the market You’re putting it in real estate maybe You’re building a business Take your choice but you have to do Something with your money so that it Beats Inflation every year or you lose the Spending power That your dollars can have remember this You can achieve much greater things than Where you are today If you’re willing to put in the work Conceive it believe it and achieve it I’ll see you next time if you enjoyed This video today and you feel like it Helped you
Share it with some friends drop a Comment and check out some of my other Videos as well Thank you for stopping by the channel