Investing 101: Why You Need to Put Your Money to Work
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Home > Investing 101: Why You Need to Put Your Money to Work
👤 Ketan Jogalekar
If you’ve ever had money sitting in a standard savings account, you might feel like you’re being financially responsible. And that's true—saving is the first crucial step.
But here’s the essential truth: Saving money is not the same as building wealth.
While your savings account keeps your funds safe, simply letting money sit is actually a quiet way of losing purchasing power over time. The key to long-term financial freedom isn't just saving; it's about making a deliberate choice to start investing—putting your money to work so it grows and generates more money for you.
This is Week 1 of our 52-week investment education series. Let's look at why shifting your mindset from a saver to an investor is the most important financial decision you can make.
The Invisible Thief: Why Inflation Steals Your Savings
The biggest reason your money needs to be invested is a concept called inflation.
Inflation is the general rise in the price of goods and services in an economy. Think about how much a litre of milk or a tank of petrol cost 10 years ago versus today. Prices go up, and that means the value of your currency goes down.
The lesson is clear: If your returns aren't beating inflation, you’re not getting ahead; you’re falling behind.
The Investor's Advantage: Generating Returns
Investing is simply a way of deploying capital today with the expectation of receiving a greater return in the future. You are essentially allowing businesses and markets to utilize your money to grow, and in exchange, they share a portion of their profits with you.
Here are the primary ways investing allows your money to grow:
Ready to Start? The Three Steps Before You Invest
Jumping into the market without preparation is like setting sail without a map. Before you start investing, make sure these three pillars of your personal finance are stable:
1. Pay Down High-Interest Debt First
The interest rate on a credit card or a personal loan is often higher than the returns you can realistically earn in the market. Every rupee you pay toward high-interest debt is a guaranteed, risk-free return on your money. Clear this burden first to free up cash flow for genuine investing.
2. Build Your Safety Net: The Emergency Fund
Life happens. You need a readily accessible pool of money to cover 3 to 6 months of living expenses in case of a job loss, medical emergency, or unexpected major expense. This fund should be in a highly liquid and safe place, like a fixed deposit or a liquid mutual fund. Never use money you might need in the short term for long-term investments.
3. Secure Your Future: Insurance Coverage
Investing and insurance are two sides of the same coin. Make sure you have adequate health and term life insurance. These policies act as a financial shield, protecting your investments from being liquidated prematurely to cover unforeseen crises.
Your TruePath Takeaway
Saving is non-negotiable, but investing is the engine of wealth creation. By taking action against inflation and ensuring your basic financial house is in order, you are ready to start your journey from being a passive saver to becoming an active wealth builder.
Next week, we will tackle the most powerful concept in finance: The Power of Compounding: Your Secret Weapon for Wealth Creation.
Ready to stop letting inflation eat away at your savings?
As a mutual fund distributor, TruePathInvest can help you build an investment plan designed to beat inflation and achieve your specific financial goals.