‘Cash is king’: The four money myths holding your savings hostage

If you’ve got tens of thousands of dollars in savings, and you know you probably ‘should’ invest it, but you can’t quite bring yourself to do it – today’s column is for you. Today, I’m sharing the somewhat misguided beliefs that might be holding you back.

You think cash is safe, investments are risky. You’ve heard about market crashes, people ‘losing’ all their money in investments, and you think it’s safer to just keep your money in a savings account. At least you can’t lose it, right?

This is a little bit of an illusion. Cash is not exactly ‘safer’ than investments – it is subject to less volatility. The value of cash is more predictable – you’re not going to wake up tomorrow and find that the value of cash has dramatically changed overnight. That doesn’t make it ‘safer’ per se.

Cash has its own risks. Your cash will not keep pace with inflation long-term, and therefore is constantly losing value. If you have $20,000 sitting in your bank account, that might feel like a lot of money today, but it won’t feel like a lot of money in 20 years when the price of everything has gone up and suddenly that money doesn’t stretch as far.

There is no such thing as a ‘risk-free’ option. Investing has risks. Not investing has different risks. You don’t get to opt out of taking risks – you just get to choose which risks you take.

You think property is safe, shares are risky. The underlying narrative behind this assumption is: companies can collapse, or the market can crash, and then the value of your portfolio will be wiped out. But property remains.

Only a tiny percentage of the population will ever be able to achieve their long-term financial goals with property alone.

This is a gross oversimplification of how financial risk works. There are many different factors that contribute to how ‘risky’ any financial decision will end up being.

There are risks with property that do not exist when building a share-market portfolio: the risks that come with putting all your money in a single property, taking out a six-figure mortgage, having high costs to enter and exit the asset as well as ongoing maintenance costs, having your money tied up in a highly illiquid asset, and so on.

Contrary to what the property gurus want you to believe, only a tiny percentage of the population will ever be able to achieve their long-term financial goals with property alone.

This means that even if you do buy one (or two) properties, it makes sense to understand how share-market investing works so you can add liquidity and diversity to your portfolio.

You think you can avoid investing by ‘earning more’. For some, making money becomes a comfort zone. Whether you’re in a job or self-employed, you may have developed a certain familiarity with the idea of getting paid in exchange for work.

Building wealth (ie. investing in assets) takes a different kind of work to making money. This is a kind of work you may not be familiar with. Maybe no one in your family invested. Perhaps it’s a new concept to you. It might feel easier to focus on ‘earning more’ than ‘building wealth’.

This can create a certain level of complacency (at best) or avoidance (at worst). You tell yourself that you can somehow avoid the work of learning to invest, if you’re earning and saving well.

However, that’s like telling yourself that if you eat healthy, you don’t need to exercise (or vice versa). Both those things have a critical and irreplaceable function in the context of your health. Likewise, no amount of ‘making money’ can actually replace the role that investing plays.

You see investing as a ‘chore’ you keep putting off. You’re doing well – you have a decent income, you save good money, you have enough for living expenses and more, you’re not in financial struggle. Life is comfortable. So, you’d rather spend your free time doing things you enjoy, and learning to invest is not one of those things.

That’s because you’re disconnected from the possibilities investing can open up for your future.

Investing isn’t about putting food on the table, or covering your basic expenses. Investing isn’t about security or even comfort. To some degree, you can create a reasonable level of financial security and comfort if you earn and save really well.

Investing is about giving yourself the opportunity to experience a life beyond the basics. It’s about opening up your future to possibilities you did not even think were available to you in this lifetime.

Did you ever think you’d be able to one day afford a second home? Put your kids through private school? Take a year off and travel the world, with the entire family? It’s possible. You don’t need to win the lottery. You just need to learn how to invest.

Paridhi Jain is a money and mindset coach who combines practical strategies with mindset transformation to help clients create more freedom and fulfilment in wealth, work and life.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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