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Importance of Savings and Investments

importance of savings and investments

IMPORTANCE OF SAVINGS AND INVESTMENTS

Why people should save and invest despite financial struggles.

 
Importance of Savings and Investments

The Importance of Savings and Investments

People must learn to change their mindset towards money. The ideal mindset, according to experts, must be; Income – Expenditures = Savings

VS ordinary people’s mindset;
Income – Expenditures = Savings

Money experts and coaches believe that the mentality of people towards money was directly affected by how they were raised as kids. For experts, kids must be taught the correct way of handling money at an early age.

[ TO KNOW MORE ABOUT SAVINGS ACCOUNT FOR KIDS CLICK HERE ]

A money coach and expert, Chinky Tan, shares on a TV interview his experience on how his parents raised him as a kid; He follows the 50-25-25 rule in money handling.

50% – for savings
25% – to start a business to make money grow
25% – spending

To explain further, it means that if your current lifestyle costs Php100,000/month, you should be earning Php400,000/month.

HARSH TRUTH:
Here are some tough questions for everybody:

-What would you do if something bad happens to the breadwinner of the family?
-Can you perform his duty?
-Can you earn the same amount of money?

Most people cannot answer those questions, as they may not have realized it yet.

What people need is an Income Replacement Fund, it is an assurance for the family just in case an unfortunate thing happens. According to experts, to get the amount of the ideal Income Replacement Fund is by multiplying the monthly expenses by 12 ( 12 months/ year) then add zero to the end.

Example:
P50,000 x 12 = P600,000
P600,000(+0) = P6,000,000

Yes, P6 million! That’s how much money your family should inherit. The Income Replacement fund is different from the Emergency Fund.

The key here is investments. People must realize the importance of investment, but how?

To avoid scams, here are some important rules in investing!

The Importance of Savings and Investments: The Rules in Investing

Rule Number 1 – never invest in something that you do not understand no matter how profitable it may sound. Ignorance is the number one killer when it comes to investment.

Rule Number 2 – Never invest out of greed!

Rule Number 3– Never invest based on the function of trust! Do not be deceived by an enticing ROI (Return on investment).

Below is a perfect example of a typical situation that often happens to people.

Juan receives his P2 million retirement fund. Pedro encourages Juan to invest and offers a good return on investment, 5% per month or 60% per year. If Juan invests half of his retirement fund (P1 Million), this means that his money will earn P50,000/month or P600,000 per year.

In this kind of situation, What would you do if you were Juan?

Since Juan did not know about the rules in investing, he invested half of his retirement fund.

The checks go ok for the whole year; he earns the whole P600,000. |

In situations like this, greed always overshadows logic.

The truth is, Juan would never pull out his investment; instead, he would invest the other half of his retirement fund to earn more, and the moment he invests in the other half of his retirement fund, he will never get his money back.

People must realize that scammers are good at playing other people’s emotions.

JUAN’S INVESTMENT
P1,000,000 (Initial Investment)
+
P1,000,000 (Additional Investment)
—————————–
P2,000,000 (Total Investment)

RETURN ON INVESTMENT
P600,000 (Total ROI)

Juan gave away (P1,400,000) the money thah he had earned from many years of hardwork.



The Importance of Savings and Investments

The Importance of Savings and Investments
Importance of Savings and Investments was last modified: April 10th, 2020 by Joyful Mommy

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* A proud mommy * Full time mom * part time web project manager * fond reader of web forums especially about parenting * loves to share useful information * loves her daughter and husband * happy individual * God Bless everyone!

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