From the course: Build Sustainable Wealth and Get Out of Debt

Saving to bring a return on your money and build liquidity

From the course: Build Sustainable Wealth and Get Out of Debt

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Saving to bring a return on your money and build liquidity

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- The next step is saving your money. Saving money is important. Maybe you even remember sometime during your youth that one of your parents, your grandparents, maybe a teacher or a neighbor mentioned the importance of saving a portion of the money you earned. You might have been told to save for future expenses. The problem is that if these future expenses aren't clearly spelled out, you might get the idea that whenever a future expense arises, you're justified in using your savings. That can result in a savings account with a near zero balance whenever an expense comes up. That is what some people call the sinking fund method of saving, saving up, spending, and starting back at zero. Now, along comes credit in the form of credit cards or loans, and now we find that we can first spend and then make payments and savings doesn't even play a part in that process. Let's face it. Some savings vehicles, such as savings accounts, don't provide much of an incentive for saving because our saved money earns almost no interest. Other types of financial accounts masquerade as savings vehicles when, in reality, they are investments. While investments can provide the opportunity to gain, they can also set you up for loss, even of your original money. If you use these types of financial accounts, you actually skip both the step of saving and building equity and jump to the last step in building wealth, which is investing. Since you're not ready for that kind of risk yet, you don't want to do that. Skipping ahead and missing steps will not put you on a solid foundation for building wealth.

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