Investing or saving, which one should you choose? It depends. Because both saving and investing play integral roles in your personal finance. Money that you put into a savings account is safe and accessible and provides a financial lifeline in times of unexpected financial emergencies, like a flat tyre or an urgent medical procedure.

Having an emergency fund also gives us peace of mind knowing that we always have a financial buffer. Investing, on the other hand, serves a different function. If savings can be thought of as a life buoy, saving you in times of unexpected moments, investing would be akin to building your dream boat.

Investing is buying an asset like shares of a company that you believe has the potential to become more valuable with time. By buying these assets, you protect yourself from the depreciating value of money and give yourself a cushion against rising inflation rates.

Growing your money is the key objective of investing, and it is a superpower to be harnessed that will ultimately allow you to live life to the fullest, free from the constraints of the cost of living your life.

Instead of letting your money sit idle, take a proactive approach to managing your finances by investing.

Investing puts your money to work in avenues that have the potential to yield higher returns; whether it's through the appreciation of stocks, interest from bonds or dividend income from blue chip stocks, investing opens doors to wealth accumulation beyond what traditional savings can offer. 

The importance of investing becomes even more pertinent, as global market prices and inflation rates continue to climb at an unprecedented rate. While savings might provide a sense of security, they often fail to keep pace with the rising cost of living. 

Over the last 50 years, Singapore’s inflation has grown steadily at an average rate of 2.6% a year. Remember back in the early 2000s when you could buy a house with just a few hundred thousand dollars? Today, that will likely only cover the cost of renovating your home.

That’s because the value of money and its purchasing power, depreciates as inflation rises, resulting in increasing prices.
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By failing to invest, your money is quietly eroding as the purchasing power of your money dips with the rise in inflation. Investing helps to mitigate this and acts as a hedge against inflation by providing opportunities for capital appreciation and income generation. 

And by allocating funds into assets that historically outperform inflation, such as stocks or real estate, you can safeguard your wealth against the erosive effects of inflation.

The great Albert Einstein once said that “compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”. So, what exactly is compound interest?

Simply put, compound interest refers to interest received on top of the money you've already earned. Compounding rewards patience and discipline, turning small contributions into substantial wealth over the long haul. This creates a snowball effect that accelerates the growth trajectory of your portfolio.

For example, your bank has an interest rate of just 1.7%, and you're planning to save $1000 each month.

If your goal is to accumulate a net worth of $1,000,000, it'll take you a whopping 52 years to reach that amount. However, that same million dollar goal can be achieved in half that time, 26 years to be exact, if invested with an average return of 8.1% per year
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While it’s still a long period of time, investing can put this seemingly unachievable amount within the grasp of many. With the power of compounding interest, this can help fast track your financial goals. The longer your investments have to compound, the greater the potential they have to grow. Even modest contributions can grow into a significant sum over time. So it's best to start investing as early as you can.

At the end of the day, investing isn't just about amassing wealth just for the sake of it; it's about achieving the life you've always wanted and giving yourself the freedom to live life on your own terms.

Whether it's to travel the world or pursue your passion projects, investing acts as a stepping stone to realising these aspirations, and relying on your savings alone may not allow you to make your wishes come true within your desired timeframe. So by investing, you're laying the foundation for a future where you have the freedom to pursue your dreams without limitations.

Investing is a tried-and-tested way to build wealth sustainably.

If you're ready to take the next step towards investing your dollars, check out other videos to kickstart your investment journey.