Savings are an important component of our financial life. This is because no person in the world makes money in the exact pattern that he wants to spend it in. For instance, when you are young and single, you might be making more money than what is required. On the other hand, when you are retired, you are making no money at all and require some to survive. Savings and investments are the key here. They help you avoid starvation and gluttony and live a predictable financial life.
Cash Is Trash: Keeping your holdings in cash and bank balances is simply unadvisable. You need to keep a certain amount to meet immediate liquidity requirements. However, keeping all of your money there at a single point in time is counterproductive. The interest rates offered by banks on savings accounts are always less than the inflation present in the market. Hence, you may be losing purchasing power. Your $100 may grow to $105, but it will buy goods worth less than $100 today. Hence saving in cash should not be your objective.
Invest In Real Assets: The best hedge against inflation is real assets that have a tangible existence, such as your house. Real estate grows in value over years. Even if it does not, it does provide you with stable passive cash flow. Gold and silver are known to be the best hedges against inflation. However, ensure that you hold them in physical form.
Invest In Paper Assets: Also ensure that you are well invested in the markets. Invest in a portfolio of stocks, mutual funds and bonds. Keep varying the percentages of asset allocation at different stages of your life.
It is important to save. However, it is even more important not to lose the purchasing power of your money when you save it.