Have you set up different pots of money for different purposes and over different time frames?
Let’s start with a savings account which is a good place to keep money for short-term goals.
Saving account is good to store what I call ‘frozen money’. It’s money that you do not touch at all. Money that is put away as emergency funds (recommended amount is about 6 months to 12 months of your monthly expenses).
However, IMO, a savings account is not a good choice if you are saving money for a goal that is five or more years away. Money saved for long-term goals needs to be protected from “purchasing power risk.”
What do I mean by this?
I’m sure you realize that the prices of goods have increased over the last few years.
What’s inflation? Inflation causes the prices of goods and services to increase over time.
This means that the money you have in 10 years won’t purchase as much as the same amount would purchase now.
The risk that your dollars will be worth less in the future is called “purchasing power risk.”
For example, remember when you were a teenager, how much less money it cost to purchase a movie ticket at the cinema? It may have only cost you S$5 to buy the same movie ticket 10 years ago that now costs S$7.50 during the weekdays and S$10 during the weekends.
Since your teenage years, inflation has, over the years, caused your money to have less purchasing power than now.
So please realize and accept this fact; a savings account does not protect you from purchasing power risk.
Therefore there are 2 types of risks associated with money:
There is a risk of losing capital and also a risk of losing the purchasing power of your money to inflation.
Which is guaranteed to happen? You guess it. The “purchasing power risk.”
Don’t pay the price of ignorance. Don’t pay the price of waiting either.
As many financial experts suggest, only investing in stocks and bonds for long-term goals can help you avoid purchasing power risk in the long run.
Take actions TODAY to do better financially for your future. It’s your money and your responsibility. Remember, because you’re worth it!
All you have to do is to engage me and let me guide you to set up a disciplined system to save and grow your money with financial experts that have performed consistently over the years.
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Nothing in this material constitutes personalized investment advice. Information provided here should not be considered as advice or as an offer or enticement to buy or sell or trade.
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