Are Your Savings a Thing of the Past?

 

From a young age, most of us are taught by our parents or teachers to save part of our earnings. Save for a rainy day, a deposit for a house, a special occasion, or an emergency. Saving our money is ingrained in us. 

 

But is saving money in the bank a smart thing to do, both now and for future generations?

 

Putting money into a savings account is a smart thing to do for a percentage of your wealth, to ensure you have money set aside in case of emergency. But for many parts of Europe, individuals are being charged to do this.

 

The European Central Bank lowered its interest rates below zero during 2019. Negative interest rates mean it costs you money to keep your savings in the bank and was introduced as a last resort to stimulate growth in the economy in Europe. The plan was to lower interest rates below zero to encourage banks with significant cash holdings to get capital out to work.

 

We’ve all heard the phrases “the rich are getting richer” and “it takes money to make money” but many of us would assume this relates to the rich earning high salaries and accumulating savings in the bank. When we think about our savings account, for example in an ISA, you’d be lucky to make 1% of interest per year on your savings. Considering it costs you money to have your savings in the bank in Europe, this begs the question; how do the rich grow their wealth if their savings are not growing in the bank.

 

Many individuals who are growing their wealth faster than the average individual are doing so by investing their capital in assets. We can accumulate wealth by the rising value of assets, such as property and shares. The wealthier have more assets and more capital gains. These are banked, not consumed, explaining why the so-called rich get richer. Property, in particular, has been very profitable for investors in the UK since the 1990s.

 

Could it be time to challenge our beliefs of putting a portion of your salary every month into savings? I’d say it’s time to reassess what part of earned income is saved, and increase the portion that’s invested in assets. The start of a new decade could be the perfect time for you to assess your current wealth and consider investing a portion of your savings in assets. 

 

If you’d like to get into property investing but don’t have the time or knowledge, book a call with me using the button below to discuss how I could help you on your journey.