There are quite a few reasons why it is very hard to get rich by saving money. One of the big reasons is because of taxes. When you save money, you actually are getting hit hard due to taxes as saving isn’t an activity that the government wants it’s people to do. Inflation is also an issue because when you save money, it depreciates over time. Finally, avoiding risk can prevent you from getting rich as you need to spend money in order to make money.
- Inflation makes it much harder to save because the higher the inflation the less value the dollar has.
- Taxes prevent us from saving money as a good chunk of our salary is removed each year.
- It is difficult to make money by avoiding risks as sometimes you need to make a risk in the stock market for example to get a huge reward.
“However, that same amount invested with compound interest would have grown to about $20,000, assuming a 6 percent rate of return. Even if you only earn a 4 percent rate of return, it still grows to around $7,000.”