For many, 'spend less and save more' is the key to financial freedom. But this is not the case for Nigerian financial expert Olúwatósìn Olaseinde.
In a recent Twitter post, the founder of a personal finance platform called Money Africa warns against the common practice of leaving cash in a traditional savings account.
According to the expert, doing this leaves you with less money not more as a result of something called inflation.
Explaining the term, she writes, "Inflation is the general increase in the prices of goods and services The National Bureau of Statistics measures inflation rate services by weighing a basket of items containing milk, bread, imported goods, rent etc The aim is to calculate increase/decrease in the prices."
Olaseinde goes on to say, "The inflation rate as of December 2018 was 11.44%, which is 0.16% higher than the November rate of 11.28%. This means that inflation (or the general price of goods and services) increased again by 0.16%. You might hate numbers, but trust me, this one affects you in real life. If you just save your money this year, the value would have reduced by next year, you would not be able to buy as many things with the same amount That's a loss!"
Stop saving, start investing
This is why the money expert is advising you to stop saving your money and start investing instead.
But not just invest anywhere, make sure you will get a good interest rate.
In her words, "When you invest your money, it grows. Actually, there are two kinds of growth ✓Nominal growth ✓Real growth The nominal growth is the return rate that comes with the investment package while the real growth is the nominal growth minus the inflation rate."
"E.g If the investment promises you a 12% rate of return, that's the nominal rate. But the real rate, as at December 2018, would be 12% - 11.44% = 0.56%. This means that if you have invested N500,000 for instance, Nominal profit = N60,000 but Real profit = N2800."
Olaseinde concludes with one strong warning - "Invest only in ventures that's equal or higher rate than the inflation rate."
More money advice
In order to get better at your personal finance, the Money Africa founder recommends reading these three books;
- 'Intelligent Investor' by Benjamin Graham
- 'You're a badass at making money' by Jen Sincero.
- 'Rich Dad Poor Dad' by Robert Kiyosaki.