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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 should learn to change their mindset towards money. The ideal mindset according to experts should be income minus savings is equal to expenditures, but what most people do is income minus expenditures, and that is the only time they save.

Money experts and coaches believe that the mentality of people towards money was directly affected by how their parents raised them as kids. That is why it is so vital that children should learn to handle money responsibly at an early age.

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

A money coach and expert, Chinky Tan shared in one of his TV interviews how his parents raised him; he follows the 50-25-25 rule when it comes to money.

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

He said that with every peso that he used to earn as a kid, 50 cents would always go to savings, 25 cents for investing and 25 for spending! He has to earn Php4 pesos before he could buy a Php1 worth of candy.

It means that if a person’s current lifestyle right now is worth Php100,000/month, he should be earning Php400,000/month if he is to follow that ruling.

If the rule is too impossible to follow, a significant step that a person can do is to copy the principle. Adjust the percentage capacity for savings and investment (even as little as 5%) and make savings and investment a habit. Discipline must be present, embracing the importance of savings and investment is necessary.

HARSH TRUTH: Questions for everybody most especially to breadwinners;

What would the family do if something bad happens to the breadwinner?

Now put yourselves in this situation;
If the mother is a housewife and the father is the breadwinner, can the mother perform the duty of her husband? Can she earn the same amount of money as her husband is earning?

Most people cannot answer these questions because they do not realize or even think about it. What people need is to have an Income Replacement Fund, an assurance for the family just in case an unfortunate thing happens to the breadwinner. According to experts, to get the amount of the ideal Income Replacement Fund is by multiplying the monthly expenses to 12 ( 12 months/ year) and add zero at the end.

For example, if a person’s monthly expenses are worth Php 50,000 multiply it by 12 (12 months), this will give a total of Php600,000 then add zero at the end. Yes, Php6million! That is the amount of money that his family should inherit. Income Replacement fund is different from Emergency Fund.

Investment is the key. People should realize the beauty of investments. The big question now is where to invest and how?

To avoid scams always bear in mind these important rules when it comes to 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 be. 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 usually happens to people.

A person receives his Php2million retirement fund; somebody offers him a good return on investment let say 5% interest per month or 60% per year. If he invests half of his retirement fund (Php1million), his money will earn Php50,000/month or Php600,000 a year! Who would not want to earn such amount without doing anything?

Let’s assume that he invested his money and the check goes ok for the whole year. In this kind of situation, the greed has already overshadowed the logic. He will never pull out his investment; instead, he will put in the other half to earn more. The tricky part is, the moment he puts in the other half of his retirement it will be the end of the story. Scammers know how to play with people’s emotions. Come to think of it, the Php600,000 he earned over the year is his. When greed comes in logic goes out!

The Importance of Savings and Investments

The Importance of Savings and Investments
Importance of Savings and Investments was last modified: June 28th, 2018 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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