Importance of Saving and Investing

Importance of Saving and Investing

• Investing money allows it to grow and increase in value over time, bringing you closer to achieving financial goals
• Starting to save and invest early in life is crucial for meeting goals such as owning a house, financing education, and funding retirement

Assets and Liabilities

• Assets are items you own with economic value, such as savings invested in a fixed deposit
• Liabilities are items you owe to others or have borrowed, such as loans from a bank or individual

Debt

• Debt is money borrowed to meet a shortfall of money when expenses exceed available funds
• Debt can negatively impact financial goals and require careful management

Time Value of Money

• The value of money increases over time due to interest or capital appreciation
• Receiving money today is more valuable than receiving it in the future due to its potential for growth
• The time value of money demonstrates that time is literally money, as the value of money now is not the same as it will be in the future

Inflation and its Effect on Investments

• Inflation refers to the rise in prices of goods and services over time
• Inflation decreases the purchasing power of money, reducing its ability to buy goods and services
• Investors fear inflation as it reduces the value of their investment
• Inflation must be considered during financial planning to ensure investments keep pace with rising prices
• Examples of inflation include a Vada Pav increasing in price from ₹2/- to ₹7/- due to rising ingredient costs