Why Saving Money is Actually Bad For You

Okay, now this is a pretty controversial topic.

You probably heard about me saying that I hate keeping excessive money in the banks.

And this advice is not from me, but from a billionaire Ray Dalio.

The Logic Behind Why Saving Money Is Bad

Ray Dalio had a simple explanation behind it.

Over time, inflation causes the goods and services you buy every day to become more expensive relative to the value of the dollars in your wallet.

Although you do earn interest on money deposited in a savings account at a bank, the amount is far too low to keep up with the negative impact of inflation.

Dalio explains that “When you put your money in cash or short-term deposit, look at the interest rate you’re getting in relationship to the inflation rate,” So you can’t keep your money in cash. If you think that’s safe, you’re looking at it wrong — it’s a sure losing strategy.”

Let's examine an example of the inflation across the various countries with a simple google search.

If you take Singapore for example, the inflation rate was at 5.4%.

So if you leave money in the bank, earning a puny interest of 2% - clearly, your money is still eroding at 3+%.

This is the reason why I really hate keeping a surplus of money in the bank.

I needed my money to work harder.

But, my money is safer in the banks!

It is not uncommon to think that way.

After all, saving money in the bank has been kind of the default way of where people store their money.

But as I explained above - saving money in the bank is not safe.

It is in fact, has a 100% guarantee - a sure-fire way for your money to erode by inflation and rising cost of living.

So if we want to live a life that is different from the masses, we need to adopt a different mindset from others.

We need to find a way to grow our money beyond inflation rates. And this means, we need to be prepared to shift our money out from the banks.

So...Where do I put my money?

Since keeping your money in a savings account is a guaranteed way to lose money, you have to turn your savings into investments.

Dalio explained that “Over a longer period of time, equities [or stocks] will have a higher return, bonds will have a higher return, real estate will have a higher return than cash,” he explains. 

My thoughts?

• If you have the capital to pay for the downpayment, put your money in quality real estate. After the initial effort dealing with lawyers and bankers, it is pretty much a waiting game.
• If you have lesser capital but lazy to monitor the stock market - put your money in the S&P 500. For myself, I would at times put a sum of money into the S&P 500 whenever the Stochastics is low.
• If you are little hardworking, then consider how to assess the quality of company and find undervalued companies to invest in. 
• If you are willing to put in the time and effort, learning how to sell options to grow your money will likely yield the best results.

Now, regardless of which vehicle you use - the point is this.

You need to know how to grow your money faster than inflation - otherwise, you will forever be trapped.

And by the way, do you know why banks want to keep your money and give you that 2% in the first place?

They are taking your money and loaning them out at 5%, 10%, 20% or even more!

They do this, because they recognise that inflation would kill them if they don't.

So if you are like me in the past, that think that banks are safe, I hope that this article changed your mind.

Saving money in the bank is the 100% sure-fire way to lose your money to inflation.