Is savings your winning strategy to building wealth? If it is then you had better seek for another strategy with better chances of success. This i
s because no one has been able to build wealth just by saving money.
Don’t get me wrong, I believe in keeping money in savings account. I believe one should save toward what one wants in future. Managing savings is good discipline which can result in having a comfortable quality of life, but not a wealthy quality of life.
So next time somebody tells you to save and save in order to become rich ask the person if he or she has done so already. I make bold to declare that they haven’t because it’s just not possible. Here are ten reasons why saving money alone won’t make you rich
1) None of the rich ascribe their success in gathering wealth to saving
You name it, I’ve read books, listened to Audio CDs, watched DVDs and spent literally a fortune studying multi-millionaires and billionaires in the last couple of years and not one hinged their success in amassing wealth to saving. A good number of them mentioned taking advantage of opportunities, meeting needs, solving problems and surmounting obstacles as the key that propelled them to achieving substantial wealth and fortune.
2) All currencies continually lose value
Every currency whether it is the Euro, Pound Sterling, Dollar or Naira continues to depreciate in value on a regular basis. The value of the Naira and what it could buy, for example, in 1976 cannot be compared to what it is now in 2016. By 2056 it would have drastically decreased in value and there is no sign that this trend will abate. Putting money into savings for the long term yields funds whose values would have seriously depreciated from what it is today. This is the major reason why you cannot build wealth just by saving money because the money’s value is constantly being eroded. The prices of goods and services constantly increase while the value of money used to purchase them goes in the opposite direction.
3) Return on saving money is infinitesimal
The returns that one receives from keeping money in savings is so minute and inconsequential, that it may not be far from the truth to say that banks do not encourage one to save or imbibe the savings culture. These days’ savings accounts attract little interest per annum for depositors which is hardly a motivator to make one want to save.
In order to build wealth savings must go along with investment.
Money embarked for purposes of building wealth may be saved first, and invested afterward. Investment is simply the process of channeling your resources into ventures that will cause them multiply and increase, thereby putting the money to work for you. The rich know this very well and are constantly on the lookout for opportunities to put their money to work, so it can multiply and continue producing wealth for them. Putting money into savings alone will not get money to work for you.
4) Your savings makes the banker rich, not you
The best place to keep your savings securely and safely is in the bank, so most people use banks for this purpose. The bank however trades with these savings by way of giving loans at high interest rates to borrowers and then paying little or no interest to the owner of these funds. In fact the banks even go as far as charging depositors for keeping and withdrawing their funds. It is also common for banks to make several deductions on depositor’s accounts that cost more than the interest earned thus making the banker richer and depositors poorer.
5) Banks can fail
Several banks collapsed several years ago thus causing depositors to lose their funds. Literally thousands lost whatever they had kept as savings in the affected banks, with some being paid a pittance compared to what they had saved by the Nigerian Deposit Insurance Company. There are still many trying to recover their lost funds.
Even though many steps have being taken to ensure that there isn’t a repeat of this occurrence in Nigeria financial system the fact that it occurred before is a pointer that there is a possibility it could happen again. I’m sure no one would like to lose their hard earned resources.
6) Your willpower can only do so much
Writing down exactly how you intend to spend for the next few years, and expecting to follow it, is the financial equivalent of a starvation diet. It is unsustainable. It may be possible for an organisation, such as a company, to follow a tight budget for five, 10, or even 30 years. This is not true for personal finance, which has to take into consideration cognition effort.
The average human being has limited store of willpower – or else quitting smoking and losing weight would be non-existent problems. Most people cannot maintain a strict budget beyond the first two months, let alone until retirement or the purchase of their first home.
7) Expenses always arise that might deplete your savings
No matter how discipline one is there may arise necessary expenses that one may have to offset from savings. For instance, if a family member becomes ill requiring expensive treatment or if you lose your source of livelihood, then there is no option but to draw substantially from your savings to stem the tide. The only way one can effectively plan for this is by having emergency fund kept aside with at least 6 months of expenses for such contingencies. But what if it is inadequate? Then one begins to use up other savings and even begins to liquidate assets.
Focusing on savings may make you timid to take advantage of opportunities to grow wealth. Those who are obsessively driven to save money become cautious when opportunities to grow their savings come their way. Now there is nothing wrong in exercising caution and weighing all pros and cons before investing hard earned resources, but to build wealth there is always an element of risk involved. Being cautious can cause one to prefer to keep secure the little resources that one has rather than seeking for ways to multiply it.
Giving your money to someone else to keep might cause you not to take time to understand money.
The truth is that no one can be more committed to amassing wealth for you than yourself. An undue focus on saving money thus playing safe with what you have amassed may lull you into a false sense of security that you have somewhere. This could limit your hunger and desire to understand how money works which is essential if you want to amass more of it.
Even though savings will not make you rich, by all means don’t stop saving! Saving is usually one of the first steps anyone who desires wealth needs to take for it is proof that your money is under your control and not vice versa. The key is adding other essential actions such as investing to your savings effort and it eventually begins to yield wealth and fortune.