Why You Should Turn Your Money Into Assets
Do You Have Money In Your Bank Account?
Here at Binvested, Nathan receives a lot of questions from the public. But, this time, he has one for you:
“Do you have money in your bank account?”
If the answer is yes, then read on.
A trip down memory lane – Nathan’s assets.
Back in the year 2000, Nathan had $11,000 in a term deposit.
He was only in year 10 at the time, and since he couldn’t buy a property for another three years, a term deposit was his only decent option.
A whopping 6.05% return meant he could capitalise on his funds until he was old enough to sign a contract of sale.
The monetary system has changed.
Nowadays, you would be lucky to get an interest rate of 1.5% on a term deposit. In fact, the return you would get each year on $11,000 wouldn’t even be enough to cover the cost of inflation.
Is the money in your bank account benefiting you? If you are saving up for a deposit, then it probably is. But if you are just saving for the sake of it, then this money probably isn’t helping you over the long term.
The monetary system has changed big time over the last 40 years. When the US Government ended the gold standard in 1971, our currencies became fiat and inflation became an issue.
Now that interest rates are getting lower and lower, hyperinflation is a big threat to the economy – and to our bank accounts.
Why Nathan loves assets.
Not only does investing in properties help to fight the effects of inflation, it also allows you to capitalise on it as well.
Say you borrowed $200,000 to buy an investment property. If it had a neutral cashflow, then it would be paying itself off over time. As inflation drove up the rent, you would benefit from an increased cashflow – while your debt stayed the same. This would make it easier to pay off – all while the capital value of the property went up too.
Now, that’s a way better return than the 1.5% you’d get on a term deposit.
Have you been earning minimal interest on a savings account? Please share your experiences in the comments section below.