Why money has to work
Money that sits still loses value to inflation. Investing is how it keeps up, and the price is that it swings.
What waiting costs
Keep €10,000 in an account paying nothing for ten years while prices rise 2% a year. You still have €10,000, but it buys what €8,200 buys today.
What working money does
The same €10,000 growing 5% a year becomes about €16,300 in ten years. After 2% inflation it buys what about €13,400 buys today. The gap with the account is the reason to invest.
Two percent is the target
The European Central Bank aims for inflation of 2% a year. It does not always get it: in October 2022 prices in the euro area were 10.6% higher than a year before.
The price of growth
Shares grow more than savings over long periods because they can fall a lot on the way. Nobody is paid for a risk that never shows. Money you need soon is better kept where it cannot fall.
Before you start
Most people invest only after three things: no expensive debt, some cash set aside for surprises, and a rough idea of when they will need the money. Each of them makes the swings easier to sit through.
Key takeaways
- Cash that earns less than inflation shrinks, slowly and surely.
- Growth comes with swings; the swings are the price.
- Money needed soon belongs where it cannot fall.