So far, investing has proved to be the most effective way to build wealth. It also helps you beat inflation, which since about 1925, the United States has averaged 3% per year inflation. Currently though, we are seeing inflation at about 4%. People believe it will only get worse and I sure as heck think so too. The huge issue with that, as you know, is that most people cant keep up. Many dont beat inflation when it’s all said and done at the end of the year and have no idea they didnt. Many people earn amounts like .02% on their normal savings accounts. The local limit to drink and drive is higher than that.
Luckily though, taking some risk with stocks and bonds can help get you ahead of inflation and hopefully allow you to feel like you’re actually getting ahead in the world by earning, hopefully double digit returns =) . At the very least, historics will show that you’ll beat inflation–at least when you use a 15 year average.
Check out these statistics:
-Due to inflation, in 30 years, you’d need $2,427.26 to equal the purchasing power of $1,000 today.
-$1,000 kept in a savings account would grow to $1,811.36 after 30 years, trailing the effect of inflation.
-$1,000 invested in stocks today would grow to $17,449.40 over 30 years, easily allowing you to outpace the effects of inflation over that time period.
