Tags: huffington post | saving | rich | wealthy

Huffington Post: Saving Money Won't Make You Wealthy

By    |   Tuesday, 04 November 2014 11:59 AM

Most Americans will never get rich because they're going about it all wrong. Saving isn't the key.

Average Americans are fed “harmful homilies” like “work hard. Spend a little. Save the difference. Let your assets work for you,” explains Huffington Post writer Ben Walsh.

The idea that people can get rich by spending less than they earn is misleading and people who believe it are destined for failure, asserts Walsh.

After crunching government data, investor and blogger Steve Roth, found that savings have very little to do with household wealth, Walsh noted.

To be rich, you need assets, like stocks, bonds and real estate. The data show wealth rises and falls with asset prices, which is why the wealthy keep getting richer.

The wealthy people also tend realize the importance of diversification.

Real estate is a key asset for building wealth. It's also the asset that has been most widely touted as essential to the average American. But many people learned a hard lesson — home values don't always go up, sometimes they go down.

When the Great Recession hit and ravaged the real estate market, it wiped out a large portion of Americans' wealth. While that asset class struggled, rich people have been able to continue reaping rewards from the roaring stock market.

When low- and middle class Americans invest in stocks they mostly do so through retirement products, particularly 401(k)-type savings accounts, noted Businessweek. That ownership could have positioned American households well, allowing them to reap gains alongside the wealthy.

But, people turn to their retirement accounts when times get hard, Businessweek reported.

After the Great Recession, many did just that — they cashed out their 401(k) accounts or tapped their pension funds. That decision resulted in immediate penalties and also long-term consequences, like missing out on the bull run in the stock market in recent years.

Saving money won't come close to helping Americans make up that wealth, notes Walsh.

Still, many people continue to buy into the idea that saving is viable path to wealth when assets are what they really need. And that's the reason most Americans never have a shot at being rich, writes Walsh.

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Most Americans will never get rich because they're going about it all wrong. Saving isn't the key.
huffington post, saving, rich, wealthy
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2014-59-04
Tuesday, 04 November 2014 11:59 AM
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