Savings alone won't grow your money. Why I started investing with a take-home pay of 200,000 yen
Hello, I’m Takuan.
“Investing is scary, isn’t it better to just save?”
I used to think exactly the same way.
If you keep it in the bank, it won’t decrease.
There’s no need to take risks; you can just save steadily.
However, my way of thinking changed after I realized one thing.
With savings alone, money doesn’t “decrease,” but it doesn’t “grow” either.
And in today’s era of rising prices, the fact that it doesn’t grow might actually be a loss.
Today, I will write about the reasons why I, with a take-home pay of 200,000 yen, started investing in addition to saving, using actual numbers.
Savings don’t “decrease.” But they don’t “grow”
First, let’s look at the good points of savings.
Bank deposits basically don’t lose their principal.
If you deposit 1 million yen, it stays 1 million yen.
This is a huge sense of security, and it is best to keep “money you might need soon,” such as emergency funds, in savings.
However, there is one problem.
The interest rate on ordinary savings accounts is very low.
Even if you deposit 1 million yen for a year, it only grows by a tiny amount of interest.
No matter how many years you leave it there, the money itself hardly grows at all.
When prices rise, the things you can buy with the same amount of money decrease
In the last few years, don’t you feel like “prices have gone up again” every time you go to the supermarket?
I feel the same way.
Food, daily necessities, and electricity bills are all gradually getting more expensive.
This is why relying only on savings is a problem.
For example, if prices go up, you won’t be able to buy with 1 million yen what you can buy with 1 million yen today.
Even if the amount remains 1 million yen, what you can buy with it decreases.
In other words, even if the “number” in your savings account isn’t decreasing, the “power” of your money is gradually weakening.
When I realized this, I started to wonder, “Is it really okay to just have savings?”
What if I had kept everything in savings? My actual numbers
Here, I will show you my actual numbers.
For the past two years or so, I have been investing in an S&P 500 index fund through NISA.
・Money I put in myself: approximately 1.66 million yen
・Current amount: approximately 2.5 million yen
・Amount gained: approximately 840,000 yen
What would have happened if I had kept that same 1.66 million yen entirely in the bank?
It would have only grown by a tiny amount of interest, and I think it would have remained almost exactly 1.66 million yen.
Even though it’s the same money, just by keeping it in a different place, there is a difference of over 800,000 yen.
Seeing these numbers, I finally understood the meaning of “letting your money work for you” in a tangible way.
(*This 840,000 yen is the figure at this moment, and it will increase or decrease depending on the market.)
Even so, I don’t invest everything
This is an important point.
I don’t put all of my money into investments.
・NISA investment: approx. 2.5 million yen
・Bank savings: approx. 1 million yen
I also have a solid amount in savings.
This is because investments can sometimes decrease in value.
If I suddenly needed money while the market was down, I would have to sell at a loss.
That is why I divide my money by its purpose.
・Money I might need soon → Savings (it’s important that it doesn’t decrease)
・Money I won’t use for over 10 years → Investment (it’s important to grow it)
Instead of choosing between savings or investment, I use both for different purposes.
This is the answer I arrived at.
Things that changed after I started investing
Since I started investing, my relationship with money has changed a little.
1. My anxiety about the future has eased a bit
I am now able to have a outlook of “if I keep saving like this, I’ll have about this much in 10 years.”
2. Monthly advance savings have become something to look forward to
Watching the money that is automatically invested on payday grow little by little is a small pleasure of mine.
3. I’ve gotten used to price drops
At first, I felt anxious seeing unrealized losses, but I’ve come to understand that if I intend to continue for the long term, I don’t need to worry about the ups and downs along the way.
Summary: Protect with savings, grow with investments
Let’s summarize today’s discussion.
・Savings don’t decrease, but they don’t grow either
・When prices rise, the amount of things you can buy with the same money decreases
・I have accumulated 1.66 million yen, and it is now about 2.5 million yen (an increase of about 840,000 yen)
・However, I don’t put everything into investments. I also keep a solid 1 million yen in savings
・Money you need soon goes into savings; money you won’t use for over 10 years goes into investments
If you are currently able to save money but haven’t taken the step into investing, please first consider how much money you have that you won’t need for at least 10 years.
Try putting a portion of that into investments, starting with a small amount.
Just by doing that, the landscape of your finances 10 years from now will surely change.
If you’d like, please let me know in the comments
Have you already started investing? Or are you still hesitant?
For those who are hesitant, I would be happy if you could tell me what you are most worried about.
I will answer the concerns I receive one by one in future articles.
5 common failure patterns
Here are 5 common mistakes people make when balancing savings and investments.
① Keeping everything in savings because it’s ‘scary’
It won’t decrease, but it won’t grow. Even if it’s just money you won’t use for over 10 years, try investing it little by little.
② Putting even your emergency fund into investments
You might end up having to sell your investments at a loss during an unexpected expense. Secure your cash first.
③ Putting money you will need soon into investments
Money for moving or wedding expenses is money you’ll need soon. Keep it in savings.
④ Starting with a large amount suddenly
It’s fine to start with a small amount at first. Increase it little by little once you get used to price fluctuations.
⑤ Quitting immediately when prices drop
With long-term investing, ups and downs along the way are normal. Set up a system so you don’t stop.
I only have 2.5 million yen in assets myself, so I’m still halfway there.
Let’s keep moving forward steadily together🌙
Thank you for reading until the end!
On X, I post daily about my realistic asset building with a take-home pay of 200,000 yen.
I’m honestly sharing both my unrealized gains and losses📈
I’d be happy to connect loosely with others who are working hard steadily just like me. Please feel free to take a look if you’d like😊
▼ Takuan’s X (Follow here)
※ This article is a summary of my personal experience and thoughts, and does not recommend any specific financial products. Investing carries the risk of loss of principal, and the unrealized gains mentioned are as of the time of writing. Past performance does not guarantee future results. Please make final decisions at your own responsibility.