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With global inflation proving stubbornly hard to shift, putting your money into cash savings – even in dollars – doesn’t look like the best long-term strategy. If you want your money to grow, you need to adopt an investment mindset.

Are you a saver or an investor? It’s an important question because while the two are usually thought of as similar concepts, there are some very important differences. Saving involves setting aside cash to pay for something in the short-term, or simply as a ‘rainy day fund’ that you can call on when you need it. Saving should involve very little risk, and your money should be easy to access at relatively short notice.

Investing is very different, as it is about finding ways to grow your money over time. Investing means putting your money to work on your behalf – buying assets now, in the hope that their value will increase for as long as you need to hold them. Investing can sometimes require patience, but as the risks of investing are greater, so are the potential rewards.

People across most of Latin America are generally considered to be savers rather than investors. The downside to saving cash over the long term is that inflation eats away at the value of your savings. Inflation makes things more expensive, meaning your money is worth less than it used to be unless the interest you earn stays above the rate of inflation. Most banks don’t pay rates of interest on cash savings to make saving worthwhile.

Inflation is the hidden enemy of savers

As a result, for people accustomed to high inflation taking a bite out of the value of their savings, buying dollars has been the best way of preserving the value of their money. It’s no surprise that the US dollar is “in the DNA” of most savers. That savings mentality was understandable when inflation was mostly a home-grown problem, but over the last 12 months, inflation has gone global, particularly in the US. As a result, buying dollars is no longer the inflation hedge it once was, and the purchasing power of those hard-saved dollars has eroded over time. No one likes to lose money, but the painful truth is that keeping your savings in cash or using it to buy dollars, means your savings are slowly getting smaller and smaller each year.

In an ideal world, you should think about putting your money to work in ways that give it the best potential to grow. Investing is one of the most effective ways to increase your wealth and get you closer to achieving the lifestyle you want. But if you’re just starting out, there’s nothing wrong with investing small amounts and increasing how much you invest over time. If you’ve already gotten into the savings habit, then using that money to start building up your investments should feel very similar.

The ‘magic’ of compound interest

Investing in assets that are likely to increase in value over time is the first principle of investing. But there’s another important element to ensuring your money grows – the effect of compound interest. Albert Einstein called compounding “the eighth wonder of the world”, and he had a point. Compounding simply means earning interest on top of the interest already earned. But the best way to think of it is like a snowball: the longer the snowball rolls downhill, the bigger it gets. Here’s a very quick example to show what we mean.

You invest $10,000 with Bricksave and use that money to invest in residential real estate projects paying an estimated annual rental yield of 8%. Instead of spending your $800 after year one, you reinvest this money into more projects. In the second year, you’re getting an increased return from the money reinvested, on top of what your capital earns. Due to the magic of compounding, as time passes even small amounts reinvested can have a meaningful impact over time. The more you invest – and reinvest – the higher your future potential returns. It’s a great way to increase the value of your investment without doing anything.

Is investing right for you?

Saving is a great start, but it won’t get you closer to your long-term goals. Investing is one of the most effective ways to increase your wealth and get you closer to the lifestyle you want. If you’re just starting out, there’s nothing wrong with investing small amounts and increasing your investment over time. And if you’re wondering where to invest, you should take a closer look at real estate. Not only is real estate an investment that everyone can understand, but it is also one of the most reliable investment options out there when it comes to putting your money to work over the long term, thanks to the combination of asset appreciation and rental earnings.

And with Bricksave, you don’t need to be sitting on large sums of money to invest. Crowdfunding lets you commit smaller amounts of money to real estate projects you wouldn’t otherwise be able to participate. Investors can choose to re-invest their original investment and profits into other properties. All returns are credited directly into our clients’ wallets every month, so you can then reinvest whatever is in your wallet, whenever you want. 

Gaining an investment mindset

All investing carries an element of risk, or in other words, ‘nothing ventured, nothing gained’. But understanding the difference between saving and investing, and recognising the benefits of compound interest is key to having an investment mindset. An investment mindset can help lead to long-term financial security, by finding assets that will appreciate in value over time.

With Bricksave you can start investing with as little as $1,000, becoming part of a global real estate investment community of more than 16,000. Find out more here