Why you have to start investing today

Your money looses value every day and pensions won’t save your retirement. Start investing today.

• Every year your money looses value
• Your pension is not guaranteed
• How do I start investing

Your money looses value

This is due to inflation: This is the rate at which the average level of prices for goods and services is rising. Therefore, the purchasing power of currency is falling.

On average your money looses 2 to 4% per year based on the global inflation rate index. You can monitor the inflation through indexes like the Consumer Price Index (CPI).

Let’s assume you have 100 units of money in your account (eg. $100, €100 or £100 – currency doesn’t matter) . It looses buying power every year. With an inflation of 3% it looses 3% every year. Every year things become more expensive due to inflation and down the line your 100 can buy you less.

Why is inflation happening?

Many factory play into this. We can’t expand on all of them but the most important theories around this are the cost-push and demand-pull theory. In short; prices rise because the demand for goods and services rises more rapidly than an economy’s productive capacity (demand-pull) or when prices of production process inputs increase, for example through wage increases or rising raw material prices (cost-push).

What can I do about it?

That’s the right question to ask! Here are the straight-forward questions:

• Get an annual pay-rise that’s higher than the inflation rate,
• Save more money than you are “loosing” to inflation or
• Invest your money and get an interest higher than the inflation rate.

The first option depends on your career and job: Can you out-earn the inflation just through a rise in your pay? You will probably have little control over it other than doing a great job and hope to be rewarded.

The second option is the default for many – simply save money. But since your money is loosing value every year you would need to increase your annual saving rate too. 

My favourite option – and strong recommendation – is to invest your money. Let your money work for you. And at least at an interest rate that is higher than the inflation rate. You need to take tax into consideration as well. That’s why you have to investing today

Here we see the comparison if you invest your 100 “something” ($/€/£) for a moderate 5% interest rate per year. This increase in value of 5% per year outpaces the 3% inflation rate of our example.

Your money keeps its value. But on top of that, your money is growing in value – even vs. the inflation.

Your pension is not guaranteed

Even if you live in a country that provides pension, it’s not a guarantee anymore. This safety net set up by the government has holes. The social security is already under a lot of pressure – and it will get worse. It’s very likely that soon the governments can’t pay out a decent pension to its citizens anymore. 

What can I do about it?

• Get a pension plan
• Invest for your retirement

Getting a pension plan, or retirement plan, is usually a great idea if it’s sponsored or subsidised by your employer.  Even if it’s not supported by your employer it’s probably a good idea. Often they come with tax benefits and other advantages. 

However, investing for your own future is my recommendation here too. Maybe in addition to a pension plan. But l strongly advise to look into it yourself. 

Why you have to start investing today? The earlier you start the better it is.

Get started with investing

I am not selling you anything, no worries. I just have this online course… just kidding.

Great and practical advice on where to get started can be found here on the site of Mr Money Mustache.  He shares a good amount of advice on where to start.

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I do not provide personal investment advice and I am not a qualified licensed investment advisor. I am just an investor who’s trying to help others by inspiring to get educated in this field.