Investing is about more than just building wealth, it’s about protecting and growing your money in a world where inflation is constantly eroding its value.

Here are some key reasons why we invest our money:

1. Inflation
Inflation gradually reduces the purchasing power of your money. For example, in 1970, £1 could buy you 10 loaves of bread. By 2020, it could only buy 1 loaf, and today, it’s less than 1 loaf! If your money isn’t growing, it’s losing value in real terms. Investing can help you stay ahead of inflation and protect your purchasing power.

2. Compound Growth
The earlier you start investing, the bigger the impact compound growth will have. Your money earns returns, and those returns begin earning their own returns – snowballing over time. This can supercharge your money, leading to more growth the longer you stay invested.

3. Achieving Financial Goals
With the right strategy, investments can generate returns that could outpace inflation and give you real growth over time, helping you achieve your financial goals faster.

4. Potential to Generate Passive Income
Through investments, you have the opportunity to earn income in different forms, such as dividends, interest, or rental income. While not guaranteed, these income streams can be another potential benefit of investing, providing extra financial flexibility over time.

These are some of the key reasons why we invest our money.

Next time, we’ll look closer at investment risk and why people are prepared to take a risk with their money.

Important Reminder: When investing, your capital is at risk, and returns are not guaranteed.

What are your investment goals this year? Share your thoughts in the comments!