Those people who feel guilty about not saving will be interested in a concept being promoted by Robert Kiyosaki, author of Rich Dad, Poor Dad, who suggests that savers are losers. Before all non-savers get too comfortable with that proposition, his point is not that everyone should spend rather than save. Saving implies putting money away on a regular basis into a bank account where it will earn interest and slowly increase in value with compound interest.
There are three reasons why you could argue that people who save are losers.
- Firstly, the return on your savings is reduced because you pay tax on the interest earned.
- Secondly, over time, the effect of inflation will reduce the purchasing power of your money. In other words, if you save $100 and choose to spend it ten years from now, you will not be able to buy as much with your money as you can today.
- Thirdly, bank deposits offer a low rate of return when compared with other investments. That is because bank deposits are seen to be less risky than other investments.
The point made by Kiyosaki is that if you really want to get ahead financially, you are better to invest rather than save.
Investing in growth assets such as property and shares or investing in a business of your own should give you better protection against tax and inflation, and a higher return over the long term.
In my view, the best approach is to do a little of everything; invest for a good return, save for security and spend to enjoy life.