If you had stuffed $1,000 in cash under your mattress 50 years ago, today it would have the same buying power as only $137.45 did in 1968.
However, that same amount invested with compound interest would have grown to about $20,000, assuming a 6 percent rate of return. Even if you only earn a 4 percent rate of return, it still grows to around $7,000.
Dedicating a solid chunk of money to savings for the future should be a key part of anyone's financial plan, but that money shouldn't sit around gathering dust. Town's father breaks it down in the book:
The people who encourage saving mean that you should save instead of spending money. But because of inflation and the fact that what people buy will be more expensive 'tomorrow,' people spend all of their money and whatever they can borrow 'today,' so we need to be encouraged to save instead of spend. Nobody is saying, once you've saved some money, to keep it sitting in a savings account.
Rather, it's smarter to put that cash to work. "The antidote to losing money on inflation is investing," says Town, now 36. "You've got to do something with your money."
Town chose to make investing a daily habit and researched specific companies to put her money in, but there are plenty of alternatives. Here are a few simple, low-stress ways to start investing:
- Sign up for your employer's 401(k) plan and take full advantage of any company match, which essentially gives you free money.
- Contribute to a Roth IRA or traditional IRA, which are both individual retirement accounts that offers tax breaks.
- Use micro-investing apps such as Acorns, which help you begin by investing small amounts of your "spare change." The app rounds up your purchases to the nearest dollar and automatically put your coins to work.
- Try other apps that aim to make investing simple and accessible.
- Consider automated investing services known as robo-advisors that can help you out no matter how much you have in the bank.
- Research low-cost index funds, which Warren Buffett recommends.
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