Sunday, August 11, 2013

Saving vs. Investing

Saving, investing, they are both the same thing, isn't it?

Actually, I would beg to differ. Saving is mindset, habit and behaviour that requires discipline. Saving is the act of actively putting aside money, as hard as it is to resist the temptation of using it to buy something. Investing is a skill. Investing is making your money generate more money for you. It is a skill because many people attempt to do it, but only the people who are skilled are successful at it. It is a skill that may be talent to a rare few, but it is most slowly developed and trained by most people.

All my life I have been a fantastic saver. When I get my pocket money, I never spend it down to the last dollar. Somehow or rather, I always try to save a part of it. After every Chinese New Year, I will take all the money I saved throughout the past year, add in my angbaos and birthday money, and I will ask my father to put it into the bank for me.

It is a really strange process. I put money in, and I never take money out. But then again, I have never felt compelled to purchase something that required me to withdraw money from my bank account. With the amount that I save from my weekly pocket money, it is usually enough for me to buy simple things I want, or to buy gifts for family and friends.

Well, the point of this story is mentioned above - I'm a fantastic saver. I get money, I spend less than what I got, I save the rest. I have never borrowed money to buy something that I could not afford. If I ever borrowed money, it has only been because I did not have that amount of cash on hand.

Wow, fantastic. Good job, So I'm going to be rich because I'm so good at saving? Well, I think the answer is both a yes and no.

My money all my life have been sitting in the bank, earning the pathetic rates of a savings account. When I was 21, my father generously asked me if I would like him to help me invest some of my savings. Since I was going to be in the university, I wouldn't be spending any large amounts of money anytime soon, so I passed my dad some money for him to help me invest. Last month, he gave me back my principal with the interest earned. Over the past 2 years, he had helped me grow it by 2.4%, or annualised at 1.2%. I wouldn't say that this is bad, bank rates are 0.25% a year?

Now, with my the money that my father had helped me invest, together with the remainder of my savings and my monthly income, I am now going to embark on a plan to continue saving well, and now take the investments of my own money into my own hands!

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