What Are You Saving For? How to Use Your Savings to Build Wealth

Have you seen people’s New Year goals before?

Even if you have not seen other people’s own, you have seen your own and you know the kind of things that are written there.

Things like save three hundred thousand naira this year. Or save at least twenty percent of my annual salary.

Of course, there are other things written down there, like get married or at least find a girlfriend or a boyfriend, or buy your dream car, or find a better job or move out of this wretched house by end of the year.

But we are concerned about the lofty saving goals that we set for ourselves at the beginning of every year. Or should I say our penchant to always save. To be clear, there is no problem with saving and having these goals. For me, so long as you are not starving yourself, the loftier the better.

The question is: what are you saving all this money for?

Are you saving because your parents or people like me have convinced you that it’s a good habit to save? Therefore you save. Just save.

A lot of people have the mindset that as long as they are saving, they are doing well. It doesn’t matter what for. To them, savings is savings.

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Save with a purpose

Don’t just open a savings account and stack up money there every month. Have a purpose for your savings.

And I don’t mean spending purposes.

I will repeat this again. I don’t mean spending purpose.

I mean investment purposes. Things like shares, bonds, properties, starting your business, or financing an existing one. Things that grows your finances. Things that grow you.

The greatest drawback people face with their finances is that every year, they attach spending purposes to their savings.

They want to buy a car because they can’t endure the insults of bus conductor any more. They want to change their wardrobe. Everything. So that they come out an entirely new person. They want to redecorate their house. And for the romantics, they want to wow their partners on their next birthday and show them how much they love them.

It’s always saving to spend on this or that and never saving to invest in this or that.

I understand how important all these spendings are to our wellbeing, but we must learn to save for them simultaneously as we save for investment purposes.

Saving to spend won’t grow your finances. But saving to invest, with time, will make you wealthy.

And this is why you have to prioritize your savings for investment over saving for spending.

People who don’t have a purpose at all for their savings.

There are people on the other hand, who don’t have any purpose whatsoever for their savings. They don’t save to invest, they don’t save to spend, they just save. These people value savings above everything else, yet they don’t really achieve anything with it.

They are the saving masters. Always saving. They will cringe when they find you in a bout of spending spree and they will caution you afterwards, almost reprimand you for being so stupid.

They have savings always but they don’t invest the money. It’s a shame. A big shame because in the end that money will go to waste and can’t be accounted for.

When you are like this, always saving and not investing it, you run the risk of spending the money any time. You also run the risk of lending out the money to family and friends whenever they ask you for money, and sometimes they won’t be able to pay you back. When these happen, the purpose of saving in the first place have been defeated.

Saving to spend won’t grow your finances. But saving to invest, with time, will make you wealthy. Click To Tweet

Using your savings to build wealth

So when you save, how do you use your savings to build wealth?

It is like this.

Whenever you earn every month, find the right percentage for you, it can be ten percent, it can be twenty percent of your income, set this sum aside exclusively for investment purposes.

These savings and investments every years, gives you returns. Re-invest them back. Continue this habit of savings and investments. Make it a part of your life.

This won’t stop you from saving for other life’s needs and events.

If you can keep up with this habit, you can hardly recognize your finances in five or ten years.

The only caveat is that you must understand what you are investing your money in.

Like we keep repeating on this blog, most of us are not lucky enough to be born with silver spoon. No one has left us anything. We are not lucky enough to start businesses that will make us billionaires in just five years.

For most of us, we have to do the honest work, build our wealth gradually, over years. Our greatest weapon to achieving this is through the cautious act of saving and investing.

You can use your savings to build wealth