What does it mean to save?
We work from the time we are 25 years old until we are 60 years old. The average American these days can expect to live about 77 years. So we can be sure that we will live between 15 and 20 years after we quit. During a person's working years, he or she also has to take care of a number of duties. Parents have to pay for their children's schooling. All of this costs a lot of money, and it has to be spent at specific times and in small bursts. So, it's very important to save a little bit of money every time you get paid, so that it's easy for you to pay for these things when they come up.
Won't putting away a small amount of your income be enough to take care of yourself in retirement?
It won't be enough, no. One must put the money to good use. When I say "invest," I mean that we need to find ways to give the money we have saved for the future to someone who can use it now. This will make your investment give you a return that you can put back into your investment. The money you make from your job or career is your "primary income," and the money you make from investments is your "secondary income." So, over time, even if your main income savings stay the same and your expenses go up, your secondary income will make sure that the amount you save keeps going up if you are responsible. When you save, it's like planting a tree. After a while, the seed you plant will grow into a tree that will bear a lot of fruit, the seeds of which you can use to plant more trees. You will be surprised at how big your money tree gets over time.
When should we start to save money?
It's best to start as soon as possible. This means that you are giving your money-tree a longer time to grow. When it's time to leave, you'll get more money from your investments if you let them grow for longer. If you want to save money for the future, time is your best friend. Start by putting aside a small amount of your spare money. Putting money away every day is a good habit. If you split your pocket money into ten coins and only spend nine coins, your box will have thirty coins at the end of the month and 365 coins at the end of the year. If you invest carefully, you will make 30 extra baby coins every year, which you can put back into your box. Soon, you'll have more coins than you can keep track of.
What else can we do to make sure our savings grow more quickly?
1) Watch what you spend.
Savings should be the first thing a family spends money on. You have to put 10% of what you earn into savings. When you are young and don't have a family to take care of, you should save more of your money. Living within your means is very important.
2) Make your money go further.
Putting coins in a cash bank is not enough. There are a number of ways to use the money you have saved to make more money over time. You can save more money by spending your money and reinvesting the money you get back. These are some ways that extra money can be used:
i) Debt
ii) Equity
iii) Precious Metals
iv) Real Estate
3) Improving your ability to make money.
Once, one of my students came to me and asked where he could take money to pay his bills. I had to tell him that he couldn't borrow money from a bank because he had no way to pay it back. I told him he had to improve his skills so he could make more money. He said that he worked very hard, but that his company wouldn't give him a pay rise. The young man had to realise that the worker works the hardest but gets paid the least.
He had to get better at what he did and make himself more useful at work.
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