money money money

money makes the world go round. and round, and round and round. money goes around the world too, at exceptionally high speeds that we, as consumers, simply love to ignore.

in a recent article on business times, it was quoted that there was about 77,000 high net worth (HNW) citizens in singapore. high net worth would mean that he or she has at least S$1,000,000 (that's one million for those who are bad with numbers) in liquid assets. liquid assets would generally mean basic cash in savings account, or even holding in equities, bonds and other financial instruments. wow. amazing isn't it.

then we look even further back in time and we can see how inflation rates within the country skyrocketed, reaching as high as 7.5%. and currently, the rates doesn't seem to be heading lower.

as compared to our regional neighbours, we have to thank the strength of our singapore dollar against others. despite such trying times, our currency value remains strong and there wasn't a very significant tumble.

with such major problems bogging us from all around us, how can we afford to spend so much and have so little? then it that case should we save too much and spend too little? how do we preserve the value of our money?

so let us talk about savings. now any tom, dick and harry should be familiar with how the bank works. put money with them and the money will grow. wow, grow, but by how much? now any tom, dick and harry won't realise that interest rates being paid out by banks are pathetic in combating the inflation. at an interest rate of 0.25%, you are below inflation by 7.25%! wait hang on, what is inflation?

lets look at it this way, just to put it simply. say you have one dollar today, and inflation rates are at 10%. say you tell yourself that you are going to put this dollar and bury it in your flower pot for a year, hoping a money tree will come out. then a year later, you take our the coin, but instead of a money tree, you have deposits of rust on the coin. bravo.

then, you take your dollar coin to the provision shop downstairs and you think that you might want to have a bottled soft drink since you have been hibernating for a whole year, together with your dollar. so you asked the store owner "hello uncle, this bottle of 100Plus costs one dollar right?" however, to your horror, the owner gives you an icy glare and says "ONE DOLLAR TEN CENTS!" and with that you go "WHAT THE FUDGE?!"

the above scenario, though may be somewhat inaccurate, shows the effects of inflation. as the value of money drops due to inflation, the dollar in the future may only cost 90 cents today. and to keep pace with inflation, prices of everyday things go up.

now what? how can we ensure our money don't grow mushrooms, but instead, grow more money. the answer is simple, but yet most people choose not to even give it a thought because they feel that the future is risky and uncertain. (well even any brain dead guy on the street knows that so what makes you think you are special?)

investment opportunities gives you the ability to keep pace with inflation, and at the same time, grow your money. the earlier you invest, the more money you will have in the future. this is simple math: compounding interest. a sound investment allows for a person to effectively grow his money over long periods of time, and hence when the future arrives at his or her doorsteps, he or she will have much more than what was being put in. a theoretical figure would be an investment of $4,000 per annum at a return rate of 7%-8% annually. in about 40 years, say when you retire, you'd probably be joining the high net worth people.

however, with returns comes risks as well. the thought of risk put many people off, because most of us live in fantasy-land where we think low risk can generate high returns. boys and girls, time to wake up ok? the risks involved in investments can be properly managed, and minimised through various means. hence, an investment portfolio usually has risk management systems to allow for investors to sleep with a sound mind and a clean smelling pillow at night.

at such times, the banks, are just like a safe box. spiders live in safe boxes. so start your investments early. for more information regarding investment opportunities, strategies and products, my msn channels are open.