Why Savers are Losers!

This week I was working on refinancing a property I bought in Oshawa.  It was one of the first ‘legal’ duplex projects I took on.  In the 3 short years since I have owned this property, it has doubled in value based on the appraisal the bank completed.  It is a little bungalow with yellow painted siding – but it has done well for us.  Buying real estate is the only thing I know of (and I don’t claim to know everything) that allows such returns.  If I had simply put the money I used to buy this house in the bank or in mutual funds………….well…………..keep reading!

A few years ago, I met the man who had been a great influence on my life for so many years – Mr Robert Kiyosaki.  If you haven’t heard of him, he is a world famous financial literacy author who has published a dozen books under the Rich Dad brand.  I have read most of his books and I highly recommend them; they are simple to understand and very interesting to read.  I would start off with his first classic book titled Rich Dad, Poor Dad.

So back to my meeting with Mr. Kiyosaki; his staff said he wasn’t allowing for any photos, but my wife went over and insisted that she’d never hear the end of it if I wasn’t able to meet him personally.  So here we are:

I know the title of this post goes against the tried and true mantra “Save Money”,  however keep reading so I can explain.

Saving is not the problem, in fact spending less and accumulating money is important.  But what do you do with the money you save – does it sit in the bank?

So back the statement ‘savers are losers’ – lets explain what Mr. Kiyosaki meant when he said this.

Let’s start with the basics – our dollars are not backed by anything; so they are considered “fiat currency”.

According to Investopedia, here is a more detailed explanation;

Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity. Historically, most currencies were based on physical commodities such as gold, but fiat money is based solely on the faith and credit of the economy.

So in a nutshell, the government can keep printing money as they need it according to their monetary policy.  They can create money out of thin air (well they just go to their printing presses).  Hard to believe right?  But absolutely true!

When Kiyosaki says “Savers are Losers”, he means that if your money is not being invested and giving you a greater return than inflation (money sitting in the bank), your money is losing value. That is why saving won’t get you very far.

If you track the prices for any commodity or asset like real estate, oil/gas, gold or silver, it has all gone up in value significantly over long term.

We all know the prices of real estate have been increasing at a very fast rate especially over the last 5 years.  Also, I remember gas prices were around $0.80 a litre about 10 years ago in Ontario (we think they are low in comparison $1.30 we were paying 3-5 years ago).

In spite of all these increases in prices, the government continues to preach that “Inflation is low. It’s under control.” They are allowed to say that because the government is only monitoring inflation in consumer prices — not asset prices.

This is a huge point, don’t get deluded by the government inflation rate, the actual rate is much higher if commodity and asset prices were being taken into account.

That is why for most people, it feels like it is so difficult to save money every month.  The cost of living keeps going up at a much faster rate than the 2% (approximately) that is being advertised.

That is why “Savers are losers” because if you keep money in the bank and get a return on your money, you are not even outgrowing inflation.

Savings should be used to invest in assets. By assets, I mean those investment vehicles that put money into your pocket and not the stock market casino.

Save Money (but only for a short while) and Invest it to not only make more but not to lose value of the money that you have saved.

If the saving is purpose-driven then savers can be winners.

Saving for a reason, saving with a plan in mind—now that’s powerful stuff.

So until next time……………………………