Keeping a huge chunk of your savings in cash is not as safe as you think it is. To make money and preserve wealth, you must invest money in interest yielding assets, or put your money in ventures that ensure productivity.
Inflation in Nigeria is a big issue, the prices of goods and services never come down and it is expected that prices will continue to rise in future and the purchasing power of your cash at hand or in the bank will buy you less in future.
It is understandable why people hold cash – fear of losing money in investments, and for unforeseen circumstances. However, we all know that banks pay a small interest on our deposit and that amount is too low to keep up with the impact of inflation and not to forget the numerous bank charges.
Presently, the interest rate on savings account in Nigeria is around 4%, while inflation has grown by an average of 11.28% so far this year, with analysts predicting that it will average of 11.40% in 2019.
So where should I invest my cash?
You have to invest in assets that will beat inflation over a period of time or put your money into productive businesses because your cash will become worthless over time.
Like Ray Dalio espoused, “You can’t keep your money in cash. If you think that’s safe, you’re looking at it wrong. It’s a sure losing strategy.” He further added, “people with great ideas create productivity and get paid for it. It is better to invest in productivity than to not invest in productivity because otherwise, your money will lose buying power.”
There are lots of financial assets that have been written about on this site which you can invest in, however, my major point is to think in terms of how risky it is to just hold cash when comparing it with the value of inflation.
Should I invest all my cash?
No, you don’t have to invest all your cash. Elementary economics teaches us that we have to hold money for transactional and precautionary motives. There would always be things we want to pay for; however, the key is to only keep enough cash in hand to cover a few months’ expenses.