Investing is not seen as a method to supplement income by a considerable number of people. According to statistics, only 55% of the adults in the U.S are invested in the Stock Market, which is a significantly lower figure compared to the times before Great Depression. The data shows that people still prefer to save their money in traditional savings accounts, even with low-interest rates and rising inflation. This might be due to the risks associated with the stock market and investing. Whatever the reason, it is crucial to understand the importance of investing and its role in today’s world as a method to generate extra income to achieve financial goals faster. Here are some of the reasons why you should consider investing in the stock market:
Investing can help you reach your financial goals faster. Is your goal to retire comfortably? Do you want to supplement your child’s college fund or make a down payment for a house? Whatever your long-term financial goals are, investing can help you reach those goals quickly. Wealth creation through investing can bridge the wealth gap in certain communities and can provide a better financial footing for your children and generations to come. By investing earlier in life, you can take advantage of the power of compounding. Compound interest is often called the interest of interest, and it allows the investors to grow their money quickly. Compared to traditional savings accounts, these interest rates are much higher, which allows the investors to build their wealth quickly.
Inflation refers to the decreasing purchasing power of people. You might have noticed that the price of some of your favorite products has increased in the past decade. This means that with the amount of money you had in the past year, you won’t be able to purchase the same things or live as comfortably today. Consider saving your money today in traditional bank accounts with relatively low-interest rates for thirty to forty years until you retire. To put things into perspective, the average inflation rate in the U.S is 8.5% per annum as of now, while the interest rates of popular retirement accounts range from 5% to 8%. It is pretty obvious that by investing your money into a savings account, you are losing money in the long term. The safest options in the stock market facilitate a return enough to beat inflation.
Investing is an attractive option for folks who want to retire early. If you want to retire comfortably, you need to have a large amount of money saved enough to lead the similar lifestyle you are used to. Investing can help you reach this financial goal faster with its higher returns. A comfortable retirement plan should have enough saved up for living comfortably for at least 30 years for someone who wants to retire at the age of 60. However, the amount you should have in your retirement fund depends on a few other factors, such as how soon you want to retire, what kind of lifestyle you want to live, etc.