If you have never invested before, the idea of putting your money somewhere other than the bank can appear daunting. Thus, many of us end up postponing investing out of uncertainty, and never come to reap its gains. If you’re still hesitating, here are five reasons why you should start investing as soon as possible.
1. Investing protects your money from inflation
Inflation is inevitable, and a healthy economy will inflate every year. However, this is scary to many consumers because inflation erodes the value of money slowly. It is frightening to know that your hard-earned savings today will be worth less ten years later. Through investing in vehicles that have strong rates of returns, you are effectively protecting your money from inflation. Now, some people may wonder why they should invest when their savings accounts will similarly return annual interest. This is because the interest rates offered by banks on savings account is usually less than 1%, while Singapore’s inflation rate is expected to hit 1.48% in 2026? Merely keeping your money in a savings account is not enough to ward off the erosive effects of inflation, but investing will keep it safe.
2. Compound interest grows your assets with time
Many of us have been told that we should “make your money work for you.” We know that we can do this through investing, but how exactly does it work? Part of the magic behind it is compound interest. In simple terms, compound interest is the interest on interest. If you have an annual yield of 5% on your $10,000 investment, your annual return would be $500 in the first year. In the second year however, the return would be $500 with an additional $25 due to compound interest. It’s easy to see how your net worth can balloon with a few simple investments.
3. Generate passive income
Similarly, investing can also generate passive income for you, which would be especially significant when you are looking to retire. Being without an active source of income in retirement can be dangerous because nobody knows when money may be urgently needed. Passive income through investing can put your mind at peace, as money flows in regularly from interest or dividend payments. Holding onto high liquidity assets can also be a valuable source of emergency income.
4. Investing helps you reach your financial goals better
In short, investing is all about growing your net worth and keeping your money safe. As an indirect result, investment is thus effective in helping you reach your financial goals better and faster. Whether you are saving money because you want to buy a house, a car or simply growing a nest egg for the future, investing your money can help you reach these goals much quicker than merely leaving your money in a savings account.