Why Investing is Important

Investing is important for most of us, as money is required to acquire goods and services. Investing is a way to make your hard-earned money work for you so that you can work less to have more in the future. It’s all about having the freedom to live financially stress-free. Achieving a state of financial freedom is possible with the correct mindset and strategy towards money and investing. Investing is also important because money loses value over time due to inflation. Inflation is the general increase in prices over time, meaning a dollar losses buying power over time. The rate of inflation in Canada over the past 100 years has been around 3%. This means that if you do nothing with your money, you lose 3% on average in buying power each year. To depict this, something that would cost you $100 in 1980, would cost you around $273.8 in 2015¹. Therefore, had you kept that $100 sitting in a bank for those 35 years, it would have decreased buying power to the equivalent of $36.50 in 1980 dollars! Now, had that $100 been invested in a portfolio yielding 5%/year (and all the money was reinvested each year), the effect of compounding interest would grow our initial $100 from 1980 into over $551.6 by 2015! Representing an increase in 5.5x the buying power!²

This is why it is important to invest! You want to stay ahead of the inflation curve. Your money can grow, and if you are not proactive about your savings, it actually shrinks significantly over time.

While investing is a key step to growing your savings. It is key to understand the concept that money saved is money earned. Thus saving up hard-earned cash is as equally valuable as earning that same unit of money. Here are some money-saving tips specifically for savvy young investors.

-Yinvestors.

¹Here is a link the Bank of Canada's Inflation Calculator. 
²There is fantastic tool called Compound Interest Calculator that can help you see the impact of this and run your own simulations.

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