"If you don't find a way to make money while you sleep, you will work until you die."
These words, often credited to Warren Buffett, are more than motivation; they state a simple fact. If your only income comes from the hours you work, it stops the day you stop working. Those who recognise this early are the ones most likely to achieve financial freedom.
Saving is only the first step#
We all know the importance of saving money. But do we know that saved money, if kept idle, loses its value over time? Think of a person who kept 50 paise coins in his drawer in the 1990s. Do they have any value now? If your savings do not grow over time, they will be of no use in the future. Idle money loses its value over time.
The reason is inflation: the steady rise in the prices of what we buy. Suppose prices rise by 6% a year (an example, not a forecast). Something that costs ₹100 today would cost about ₹179 in ten years, so ₹1 lakh kept idle for those ten years would buy only what about ₹56,000 buys today.
Put your savings to work#
Here comes the importance of deploying money to generate money. Creating a habit of saving is difficult, but deciding how to protect those savings from losing value is even more difficult.
Deploy the money you have saved to build a source of income that earns whether you work or not. In other words, put your hard-earned money to work for you. That is what investing means.
Saving keeps money safe and close at hand, for emergencies and expenses you know are coming. Investing puts money you won't need for some time into something that can earn an income or grow in value. It carries risk: investments can fall as well as rise, and returns are never guaranteed. But over the long run, it is how savings can keep ahead of rising prices.
Where should your money go?#
If you now feel that investing is a must, the next question is where. Put Your Money to Work for You looks at the main options and the risks of each, and Lottery or Shares? explains why buying shares is not the same as gambling.
Achieving financial freedom takes more than saving. It takes sensible investment choices that help your money grow over time. Financialdiary was started to draw attention to the value of investing, and to help you build a future in which your money earns even while you sleep.
This article explains general ideas. It is not personal investment advice.