There exist such a thing as a cost to not spending any cash, this is known as opportunity cost, and is seen on a daily basis for those who choose to do so instead of investing.
A €100 put into a savings account will earn a very low interest rate, and over time, it will likely lose value due to inflation; therefore a loss in purchasing power is almost inevitable. If the €100 were to be invested into the stock market, then granted it may have up’s and downs.
But the lesson from history is that stocks outperform virtually everything else over a period of several decades, ergo it’s better to invest then store under ones proverbial mattress.
With its importance stated, not everyone is able to invest great deals of cash at a single point in time, after all we all have day to day expenses, mouths to feed and bills to pay, however, for the same price as a meal for two, anyone can get started.
Equities (such as stocks or mutual funds) are the best investment option for those who are decades from retirement. Stocks are more likely to lose value in the short term than bonds, certificates of deposit (CDs) or money market accounts, but they have been proven to be a better long-term value than any common alternative.
This is especially true in low-interest rate environments. CDs, bonds, money market accounts and savings accounts all yield less when rates are low. This often pushes savers to equities to beat inflation and bids up the price of stocks and other equity assets. Stocks are still the big winner if you select a more realistic time frame; most investors have a 30- to 40-year horizon, not 200 years.
The first step in investing €100 a month is to save €100; simple enough right? There are lots of simple steps the average person could take to cut costs in manners that won’t require drastic lifestyle changes, some main steps could be as follows:
* Shopping at warehouse stores for bulk items is a good start as bulk purchases cost less per item
* If you need a little more discipline in your checking account activity, set up an automatic transfer each month from checking to savings. Savings are more difficult to dip into, and this could end up saving you a lot more than €100 a month by preventing frivolous purchases.
* If you don't think you can save €100 a month, try tracking all of your purchases for a month. This is a healthy financial habit that can help you find a few extra savings by limiting impulse spending.
Disclaimer: This article was issued by Steve Diacono, for Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.