Originally Posted by
50CalRS4
Imagine this for example: If you manage to save 100000 $ onto your savings account, you already have enough money to let the money work for you. Put 100000$ on a online savings account at 4% interest per year and you already cash 4000$ a year without having to work for it. That means you have 4000$ that you can take and do a vacation or a great trip with or buy tuning parts with then. You'll still have the 100000 and were able to afford to spend 4000$ without having to work for the 4000$. What could be any better than that.
I'm sorry, but that is WAY flawed logic. I know you're just trying to make a point about how one should save money for the future rather than spending it .....but your example is completely off.
For starters
1.) You would need a massive amount of money, (IE: like you said, at least $100,000) to generate any sort of substantial return. The 4% interest you'd get from an online savings account is WAY TOO LOW. Inflation alone is hovering around 3-3.5% meaning that
you're actually earning 0.5-1% real interest.
Now ask yourself, is earning a 0.5%-1% interest ($500-$1000) a year from now, worth investing
$100,000 into a savings account? How many people even HAVE that much money to let it sit idly in a savings account? If you are the type of person that can afford to let a 100 G's just sit around, then, $500~$1000/yr is NOTHING to you.
2.) If you keep spending the $4000 annual return on investment every year on "vacations" or "mods" - NO, you will NOT have the same $100,000 still remaining in your savings account. That money will be worth LESS in the future than it is worth now (unless, we somehow average negative inflation in future years). Fifty years from now, you'd be lucky to get a 2059 Honda Civic for $100,000.
If you're going to give investment advice, at least understand the basic principles of the time value of money.
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