5 Critical Mistakes to Avoid When Saving

Young entrepreneurs are becoming savvy investors. We aren’t waiting until we’re in our mid-forties to buy stocks and build investment portfolios. However, there are still some among us who’ve succumbed to the fallacy that putting money into a savings account is enough. This article is for both groups of millennials. Making wise financial decisions early in life will help you set the stage for a bright future. Here’re some mistakes you must avoid to make this happen.

Ignoring Inflation

Banks lure us in with attractive interest rates on savings account. Earning 3% per annum is supposed to be pretty awesome right? It isn’t when inflation is considered.

Inflation is essentially a measure of how price increases on goods and services affects how much we’re able to buy. As inflation increases, the strength of our dollar decreases. Inflation increases annually and banks don’t consider inflation when creating their interests rates for savings accounts. That isn’t where they make their money so why should they?

I read this excellent article recently that put this issue with inflation into perspective. It has solidified my stance that building an investment portfolio makes more sense than saving in a savings account. Achieving short-term goals is the focus of my present savings accounts and that’s how it’ll remain.

Following Hearsay

Jamaicans love a good story. If wi hear seh someting guh seh den it muss at leas near guh suh. You can’t take that approach when considering the stocks and bonds you want to invest in. Listening to investment discussions is helpful, but you must do your own research.

The Financial Gleaner is a good place to start. Most financial institutions also have a blog on their websites. These blogs usually present up-to-date information about the country’s economic conditions and possible businesses to watch. Stocks and Securities Limited’s blog is a good example.

Dropping Everything in One Place

Putting all your eggs in one basket is a big mistake. Any investment adviser will tell you that a diversified portfolio is essential for building wealth.  You can invest more heavily in areas that you feel will perform best, but that doesn’t mean that all your funds should go there.

Diving Headfirst into Online Investment Platforms

More millenials are entering the online stock and forex trading world. Online platforms such as eToro and XM make it simple to create an account and start investing. Let me make this clear. There’s a reason investment advisers and portfolio managers are thoroughly trained before they start trading. Forex and stock trading isn’t something you can play around with and hope it works. You’ll lose lots of money if you take this approach.

It takes months (even years) of thorough research to truly understand how to use these online platforms well. Take the time to do the research and hone your skills before trading real money. Your friends may tell you to dive in headfirst, but don’t listen to them. You’ll make better decisions when you approach trading from an informed perspective.

Not Creating a Savings Goal

Saving must mean something else you’ll have no qualms dipping into your savings whenever you want. Think about your life goals and the money you’ll need to achieve them. It may help to have an investment portfolio for each goal. If that isn’t possible, determine the percentage of earning made that should go to each of your goals. You’ll know what you’re working towards so it’s less likely that you’ll take from it prematurely.

 

Wise investments pave the way for financial freedom. Avoiding these mistakes will set you on the right path. A fundamental truth, however, is that you must keep yourself informed about Jamaica’s financial climate. This knowledge will help you make better financial decisions.

 

Published by Christine McLean

Christine is a passionate writer who is committed to the success of Jamaican businesses. She loves dancing and writing. Her aspirations include become one of the leading content marketing professionals and financial advisers in Jamaica.

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