While saving is a great habit, it’s also important to consider the value of investing. Here’s why investing matters.
What is compound interest?
One of the most compelling reasons to invest is the power of compound interest. When you invest, your money has the potential to earn returns, and those returns can generate their own returns over time. This compounding effect can significantly increase your wealth. For example, if you invest $10,000 at an annual return of 7%, it can grow to over $76,000 in 30 years, thanks to compounding.
Beat inflation
While saving money in a bank account is safe, it may not keep pace with inflation. Inflation reduces the purchasing power of your money over time. For instance, if inflation averages 3% per year, the value of your savings will decrease, which means you’ll be able to buy less with the same amount of money in the future. Investing in shares, managed funds, ETFs, or other assets, can help your money grow at a rate that outpaces inflation, preserving and increasing your purchasing power.
Achieve financial goals
Investing can help you achieve significant financial goals such as buying a home, funding education, or reducing your work hours. These goals often require amounts of money that you can’t realistically accumulate through saving alone. By investing, you can take advantage of potentially higher returns that shares and other assets may provide over the long term, helping you reach your financial goals more quickly.
Financial independence
Growing your wealth through investing can help you create financial security and independence to do the things you love. From working fewer hours or spending more time with loved ones – financial independence allows you to make decisions based on your preferences and without being overly reliant on others.
Addressing the gender wealth gap
Women continue to face challenges in the workforce, including wage gaps and career breaks for caregiving. These factors can impact their overall wealth accumulation. By taking control of their financial future and making informed investment decisions, women can build significant wealth over time.
While saving is a vital financial habit, investing is essential for building long-term wealth and achieving financial security. By understanding the importance of investing, women can take proactive steps to grow their money, secure their futures, and achieve financial independence.
To learn more about investing, go to Investing in the CommBank app.
This content is brought to you by Girls that Invest.