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Why is it important to invest money? The money that we hold in our hands is constantly losing value because of inflation. With every increase in price of essential commodities, the value of money in our hand goes down. Over a long duration of time, the value of money will go down so drastically that it will be completely worthless. This is one reason why we should invest money.
Utilizing the money for purchasing assets that will generate additional returns will leave you with sufficient cash in hand of sufficient value at a later date. On the other hand, money that is kept in the safe and not used at all will soon lose value and will leave you in a difficult condition.
The second reason why we must invest money is our requirement of a large amount of cash at regular intervals. Debt has become a way of life and we can easily make use of loans to manage our expenses. If we use debt throughout our lives, we will need the returns from the investments to repay the debt upon retirement so that we end up with zero income and zero debts with lots of savings to take care of our daily expenses. On the other hand, you have the option of using the returns from investment for major purchases like purchase of home or the education of your child.
One can also use the investments as collateral security when purchasing a loan. An individual who has five to six months worth of monthly expenses in hand as savings can proceed further to utilize the excess money for generating additional returns.
