#60. Your Savings In Fixed Deposit Is Killing Your Money. Learn Why.

You Might As Well Use Your Money As Fuel To Cook A Nice Dinner!

Putting your hard earned money into a good savings is important. You should have a six month cash reserve. That means, as a financial savvy person, you should have cash reserve that can help you pay for six months' expenses even if you don't have any income. Saving this six months reserve in Fixed Deposit is fine. Anything more than that afterwards is just killing the value of your money.

Why?

The Malaysia's actual inflation rate is around 3 to 4%. Never mind the actual statistics of around 2 to 3% of the Consumer Price Index. Just look at how much price of petrol has increased. Look at how much price of houses has increased over the years. It's getting scary whether my son will be able to afford his own house when he starts working in 20 years' time.

So if you are getting around 3.5% from your fixed deposit, deducting of the inflation rate of let's say a conservative 2%. That still leaves you with only a 1.5% actual return. You will never prosper this way. The return is just too small to beat the inflation rate and to help you amass wealth. I realised this many years ago and quickly shifted to other more profitable investments such as unit trust and gold.

Similarly, it is just too small a return with EPF's yearly dividend of around 5% or over 5%. A good investment should rake in around 12-15% per annum. Anything more than that is extremely excellent. Again, if you can and wish, you can use the EPF investment scheme for unit trust investment. Remember to choose a good fund to see your money grow.

What is the wiser choice then? Well, smart investors usually save their money in investment that can beat inflation such as properties at good location. Or even investing in gold. Or even investing long term in unit trust funds. Investing in an index fund and applying a good investing strategy will help you maximise your returns and beat inflation.

Find out more about unit trust investment by reading my previous posts and google-ling on the subject. Feel free to leave a question here if you would like to know more. I would be happy to provide a reply.