Can Only Savings Meet Your Financial Goals

As kids, we all had a piggy bank to save money given to us by grandparents, uncles, and aunts on various occasions. Our moms stashed away some cash saved from monthly expenses for a rainy day. But money put in a cash box or piggy bank does not grow. On the contrary, money loses value over time due to inflation aka price rise. For example, if inflation is 8%, it means that if you paid Rs. 100 for something in 2021, you would be paying Rs. 108 in 2022.

Let’s understand this with an example-

Whenever we buy something for our mom, and she asks us the price, more often than not, we tell her a discounted price. This is how smart people escape the inevitable lecture and scolding for our spending habits.

The fault doesn’t lie with our mother or with us. The real culprit here is inflation. Consider this; Milk cost Rs. 18/litre in 1997. Today, it costs Rs. 72/ litre, a 400% jump in 25 years. This holds true for almost every item, be it essentials, luxuries, or comforts.

Simply put, the purchasing power of money reduces year after year. We can’t eliminate inflation, but we can focus on growing the money we have. If we need to enhance our lifestyle over the years, our money needs to grow at a rate faster than inflation.

This can happen when we invest in avenues that on average, have the scope to generate returns that are higher than inflation. Thus, saving is important, but it needs to be accompanied by investment in order to defeat the big bad- Inflation.

This does not mean making a quick search for investments with the highest returns, and blindly putting money in them. A healthy, sustainable portfolio needs to work for you- your profile, your goals, and your risk appetite.

A word of caution- (Yes,I know. If the asterisk on 50% discount ads were a person, I would be it) Hear me out though. If you’re a novice to investing, spend some time to gain knowledge, understand the pros and cons of each investment avenue and then make an informed decision. You won’t stop lying to your mother about the prices of stuff though. That’s an unrealistic dream!

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