Saving money doesn't make you wealthy

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Of course, saving is necessary, it's good to have an emergency fund, a retirement and live below your means. But that's only a minority of where successful people make their money.

If you save money for 20-30 years, with compounding interest, and have a million in your bank account, you could have $50k of residual income. Except, that 50k decades from now, will be worth like 8-10k. Which is not really much more than what you're saving each year.

The way people get wealthy is by increasing their income. Investing in their career, education/skills/certification, business, side hustles, etc.

"Saving" makes me think of putting funds into the bank where a "high interest" account pays on average 1% interest, at a time when inflation is around 2.5%. In other words you're still going backwards and to add insult to injury the govt taxes you on the 1% you earn.

"Investing" is using resources to purchase a holding stake in assets that will go up in value in the future more than inflation. Some investments are low risk such as cash funds, low risk of loss of capital, low earnings. Shares bring with them higher volatility but also higher returns. In major capital cities in Australia property has doubled in value every 7 or 8 years during my lifetime.

The big thing I have learned from watching other people and their behaviours is that for most part their expenditure equals or is sometimes even higher than their earnings. Get a promotion at work, buy an expensive car. Get their next salary increment and buy some big ticket rapidly depreciating toy. Strike it really lucky and it's a big boat to park in their driveway (that they never use) and a 5 star overseas holiday and just like that the money is gone. Rapidly depreciating stuff to make them feel "rich". Don't even get me started on personal loans and other forms of high cost unsecured finance.

Minervx_2 you mentioned two very important principles. Live below your means and invest in the future. Spend less than you earn is a surprisingly easy one, people have money in their wallets and just have to blow it. It's not hard to just spend what you need and leave the rest of the money where it is. Investing in your future includes learning skills that will make you more valuable, tools and equipment you will use to earn money. Excess funds are easily funneled into assets, assets being things that will increase in value over time.

You're right, saving alone won't make you wealthy unless you already have mega millions and can just live off bank interest. Buying and holding appreciating assets is the goose that keeps laying golden eggs, both the goose and it's dividends are the things that will continue to earn for you day in and day out, whether you choose to work or not.

Basic 'conventional' saving (in a deposit account) made some sense for most of the period 1982-2008. During that time, in the UK and no doubt in many other parts of the world, interest rates were generally higher than the level of inflation, so your money at least kept or increased its value. Then we had the great financial crisis, and things have never looked like going back to those days. Right now we have inflation officially at 5%-6% (in reality far higher for many ordinary people), with savings rates still barely over 1%. Scandalous.

Money needs to be spent of stocks, starting a company or buying property. It's hard to do it any other way.

Bank account interest does not pay more to offset inflation anymore so just savings just for savings sake is a losing proposition but you do need emergency fund but if you put a good chunk of money into the stock market for retirement you will prolly be a millionaire at retirement

most of us can't catch the next big IPO, the next best thing is to buy low on a dividend-paying stock or stock fun, then hold it through thick and thin, and buy more on the dips.

What do people here think about private equity funds? I've been putting some money into these (Pantheon International and Harbourvest Global) over the past year or so, and they've been steadily rising in value. Will it still be party time in this area for the foreseeable future, I wonder?

Improving career and increasing income is also better for investing. A person making 80k a year investing 1/3 of their income in an index fund will make more money than most people making 40k year and putting 1/3 of their income into stocks, crypto, etc.

The time it takes to micromanage stocks, cryptos, other assets, stay up to date in news and technical analysis (which btw, are likely already priced into the market) is time that could be spent developing skills or advancing career instead.

For people who don't have a lot of assets, it's not worth the time to micromanage assets. It would essentially come out to less than minimum, the amount of money you gain for how much time you invest in it.