We may have heard the phrase before that we need to ‘make our money work for us’. It sounds quite odd though and you might wonder what it means and whether it is something that you will be able to do.
What Does it Mean?
Making your money work for you means that you use your money to earn you some extra money. This might sound odd but it is something that is possible for everyone to do. For example, if you put you money in a savings account you will be paid interest. Your money is then working for you and paying you an income. However, savings do not pay out a lot of money and the phrase is more often used for investments. With investments the money is used to buy an item which may bring in an income, increase in value or both. For example, you might buy a property which you can rent out and get an income from and hope will also increase in value. You could also buy shares which you might get paid regular dividends for but will also get the increase in value. However, there is a risk with investments as they may go down in value as well as up. This means that your investment could actually do the opposite to working for you. However, if you keep an investment for a long time, such as decades, it is more likely to increase in value, although there is a still a risk that it may not increase.
Is it Something I Can Do?
So, everyone can make their money work form them. This is because anyone can take out an investment or save some money. Many people already have some savings and so are already doing this. However, you may find that these are not that big. With an investment, the return tends to be much higher. Not only will you get a payment regularly with some of them, but the value can increase which means that you can make quite a lot of return. However, savings might make some interest but the rate tends to be less than inflation some of the time and the money you have saved will not increase in value, in fact it is more likely to decrease in value although the lump sum amount will remain the same. As inflation will rise so you will be able to buy less with it.
Investments can give a big return though. In the short term they might fluctuate a lot in price and so it is easy to sell them for less than you bought them for if you sell them quickly. However, if you hold on to them for a long time, then these fluctuations will be less significant and hopefully you will see an increase in value. However, a long time can refer to at least ten years if not longer and so you will need to be prepared to wait.
However, investments are risky and you need to decide if you are prepared to take on that risk. You need to think about whether the potential return is worth the risk of potentially losing some or all of the money. You may also need large sums of money to invest in some things, such as houses. So, if you do not have that much available then you may not be able to invest. This means that you may just be more comfortable with savings. You will need to think about what you feel will work out for the best for you, depending on how much money you have and how you feel about risking losing it to get a better return.