Which is the best investment option? Option 1: Savings account
Which is the best investment option? Let’s do an exercise to figure it out:
If I gave you $100,000, what would you do with it?
- Put it into a savings account
- Buy shares
- Buy one property @ 80% mortgage
- Buy two properties @ maximum % mortgage
How would you use $100,000 towards creating wealth for your future? I’ll walk you through these few options and compare the results over 10 years to see which one performs the best. You might be surprised!
A lot of people might choose to put it on their mortgage. Some people might take a much-needed holiday. But since you’re reading this book, you probably already know there’s a better way… investing! So, where should you invest?
Option 1: Savings account
Let’s say you put the $100,000 into a savings account that earns 3% interest. Bearing in mind that you pay tax on the interest you earn. Let’s do the math: $100,000 with 3% interest, compounding yearly for 10 years comes to $134,392. So you will technically earn $34,392.
Results of saving $100,000 over 10 years.
Putting your money into a savings account is like doing nothing with it. Since you are taxed on the interest and since inflation is higher than the interest earned on savings, it’s like keeping your money in a bucket that has a hole in the bottom. Your money is slowly leaking onto the ground. In other words, the cost of living is going up faster than the interest you can earn. You probably worked really hard for your savings so rather do something with it. Your savings account is simply losing you money.
Next, let’s look at Option 2 – Shares.
~Daimien Patterson