The basics: saving, inflation, risk

Five lessons for those starting from scratch: the difference between saving and investing, what inflation does to idle money, how compound interest works and why risk and return always go together.

• Saving and investing are not the same thing — Two words often used as synonyms that actually describe different choices, with different purposes and different risks.
• Inflation: why idle money loses value — What inflation is, how it is measured and what it does to a sum left untouched for many years.
• Compound interest, explained with an example — How compounding works, why time matters more than the rate, and why the same mechanism also works against people in debt.
• Risk and return always go together — Why there is no high return without risk, what the main types of risk are and how to spot a promise that does not hold up.
• The emergency fund: the first thing to build — What a reserve for unexpected events is for, how to think about its size and where it is usually kept.

Educational and informational content only. It is not personalised financial, investment or tax advice. All investments involve risks, including the possible loss of invested capital.

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