Disclaimer: This article is about sharing knowledge. You should also do your own research and not simply do what is written here. I will not be responsible for what you do with your money. I am not a financial advisor. I will generalize a lot of things and use simple terms on purpose. Please let me know if I wrote something wrong so that I can learn and correct this article. This is NOT a step-by-step tutorial about how to invest your money. I only describe things related to the stock market, other ways to invest exist and I will not describe them here.
There are a few things you should know about your money. This article is about what I learned in my first 10 months living in the US, and what I wish someone would have told me on my first day. I will explain why you should NOT let all your money sit in your savings account if you have the luxury to spend less than what you earn.
TLDR;
Definition: Inflation is a general increase in prices and a fall in the purchasing value of money.
Here is the inflation rate in the US in the past few years:
This means that if your money grows less than this inflation rate, it’s like you’re losing money. Here is an image to better understand how the value of money changes over time.
When your money is in your bank account, it doesn’t grow. For instance, Chase has an interest rate of 0.01%.
Now that we know what inflation means, we understand that we should aim for a solution that grows your money more than the inflation rate.