One of the simplest ways to save money is to open a savings account. You set up an automatic payment to send money to your savings account every month, or just do a transfer when you have the extra cash. It might only pay a low rate of interest, but hey, it’s better than no interest and you know exactly what you’re getting. Plus, it’s not just about the interest. It’s the peace of mind. Having money there if there’s an emergency.
You definitely don’t want to put your hard earned cash at risk, where reckless businesses hoover it up and make stupid decisions with your money, do you? No, it’s better where you can see it, nice and safe in a savings account.
I felt certain that I would never “gamble” on the stock market. I’d read plenty of people pooh-poohing my approach, and that was fine. If they want to lose money, go ahead and lose it. I worked too hard to risk my cash.
I don’t know exactly why I’m writing this. If anyone had deliberately tried to change my mind about investing in the stock market, I would have put up barriers instantly. It was an off the cuff comment, not aimed at me, not aimed at anyone in fact, that sowed the seed of a new way of thinking.
“You wouldn’t want your pension invested in cash deposits, so why would you want all your savings in cash. It just doesn’t make any sense.”
My eyes narrowed and I’m pretty sure I cocked my head to the side (I tend to do this when I’m thinking about something). I absolutely wouldn’t want my pension languishing in a pitiful savings account; would you? Would you be happy to see meagre returns, whilst your colleagues took the rough with the smooth, but were more than likely going to come out with a pension pot significantly bigger than yours?
It took another 7 months after that to make my first investment. I read and read and read and in the end, I still didn’t feel like I knew what I was doing but I just went for it. Maybe it’s a foolish approach, but I feel like I’ve been more of a fool to miss out on years of growth.
See, here’s the thing. Banks and greedy and businesses are greedy.
Banks want to pay you as little interest as possible to make money from you.
Businesses want to make profits to get bigger and more successful, and the people in those businesses want to earn more money. An output of this is that the value of your shares goes up. So you make money from them.
Banks want you to save as much with them as possible so they can do more lending and make more money from you. They may pay a smidge more to get your custom, but their primary concern is their margin.
Businesses want you to invest in them so they have more funds available to grow faster. They pay dividends to attract new investors and keep existing investors, which keeps the value of shares high, so you benefit in 2 ways (increasing value and dividend payments).
Businesses can lose money. They can make wrong decisions or they might deceive people in an attempt to get competitive advantage, which ultimately comes back to bite them. I’m not denying that. But no business wants to lose money. Everyone within a business is paid to make that business a success, and therefore to make that business profitable.
In a bank, everyone is paid to extract as much value out of customers as possible. They might do this by investing a lot in customer service to leave you with a rosy glow so that you come back for more of their services, or by offering a no frills approach with minimal overheads.
Our government wants your funds to be protected if a bank goes under, and that’s a brilliant benefit of cash savings in the UK.
Governments around the world want their economies to be strong. Strong businesses mean more people employed and paying taxes and more profits to cream taxes from too. So they change their policies to try to create an environment where businesses can thrive.
Not all businesses will do well and some will fail. But on the whole, everyone is rooting for businesses to succeed. Unless you think capitalism is suddenly about to fall out of favour, it doesn’t make sense to dismiss investing on the fear of losing money*. It doesn’t make sense to keep all your cash in an account where paying you a good return isn’t in the banks’ interests.
You don’t have to put your money directly with individual companies. In fact, I wouldn’t suggest this. Instead their are hundreds, maybe thousands, of funds out there that spread your investment across a lot of companies. So if a company goes under, you don’t suddenly lose a big chunk of your investment.
Maybe your mind can’t be changed by someone deliberately trying to persuade you of the benefits of investing. Or maybe you’re not as foolish as I was….
*I guess I should caveat this with the ever frightening warning that the value of your investments can go down as well as up. Yes, they can go down a lot. But they can also go up a lot too. Over the last 18 months, I’ve seen my investments fluctuate. And, I’m obviously not a financial advisor, these are simply my opinions.
Have you always avoided investing, have you started to change your mind, or has it always seemed like the obvious thing to do to you? What advice would you give people who are worried about losing money by investing?