The 'decompound' interest

Income that is not spent is called saving. If you don't spend 10 per cent of your income every month and just keep the cash in your cupboard, then you are saving money. Keeping cash is a simple concept, but by itself, it does a lot of damage to your wealth. The basic reason for that is money doesn't retain its value. Prices rise and what was worth Rs 100 last year is probably worth Rs 5 or 10 or even Rs 20 more this year. Inflation eats away your savings, bit by bit. We all know this, but despite that we fail to incorporate this knowledge into our saving and investment decisions. We all fail to take this into account when we put away money in supposedly safe deposits and such, for long periods of time.

This article was originally published on April 12, 2022, and last updated on October 11, 2022.