Ladies, Stop Relying on Savings Alone – Here’s How to Build Wealth Beyond Savings
- Davina Jackson
- Nov 10, 2024
- 16 min read
Updated: Nov 17, 2024
Welcome to The Woman CFO – a space crafted just for you, where we embark on a journey of financial empowerment.
When it comes to building financial security, “saving money” is often the first piece of advice we hear.
And while saving is definitely an essential part of managing our finances, the reality is that saving alone isn’t going to make you wealthy.
That's because, in today’s world where inflation and economic shifts impact the value of every dollar, simply putting money aside doesn’t have the same power it once did.
So, if your goal is to achieve financial independence, increase your purchasing power, or even retire comfortably, you will need a strategy that goes beyond basic savings.
In this week's post, we’re going to explore why saving, while important, isn’t enough on its own - and what you can do to truly grow your wealth.
From the potential of investments and the impact of growing your income to making intentional spending choices, there are various steps you can take to set yourself up for financial success. And we're going to talk about all of them.
Building wealth is so much more than tucking away your earnings in a savings account. Let’s look at the moves you can make to truly grow it - not just save it.
Are you ready to dive in? Let's go!
Key Points
Saving isn’t enough: While saving is important, it won’t make you rich. You need to go beyond just stashing cash away.
Invest for growth: The power of investing lies in compounding. Let your money grow by working for you, not just sitting in a savings account.
Increase your income: Boosting your income through side hustles, career growth, or entrepreneurship is key to building wealth more rapidly.
Spend intentionally: Align your spending with your financial goals. Make every dollar count towards what you truly value.
Leverage financial tools: Use budgeting apps, investment platforms, and other financial tools to keep track and optimize your wealth-building journey.
Instant Gratification Zone: Skip to the Good Stuff
Why Savings Alone Won't Make You Rich
Saving is a solid financial habit, but when it comes to building wealth, simply saving money in a bank account just doesn’t cut it anymore.
That's because, while having a solid savings cushion is crucial by building security and an emergency fund, relying on savings alone isn’t a path to significant financial growth on its own.
Let’s break down why focusing on savings alone might actually hold you back - and how you can move forward.
Savings Isn't Enough Reason #1: Erosion of Buying Power Due to Inflation
One of the biggest reasons savings alone won’t make you rich is inflation. It is the silent force that chips away at the value of money over time.
Even with a healthy savings account, if your money is just sitting there without earning any interest, it’s actually losing value. For example, a 3% annual inflation rate means that $1,000 today will only have the purchasing power of about $970 next year.
Over time, the impact of inflation can be substantial, so if your money isn’t growing faster than inflation, you’re actually moving backward.
Savings Isn't Enough Reason #2: Limited Growth Potential of Savings Accounts
Savings accounts, by nature, prioritize safety and liquidity over growth. This means they often come with very low returns, typically less than 1-2% annually, depending on the type of account.
Even high-yield savings accounts and certificates of deposit (CDs), while better, typically only offer around 3-4% annually at best.
This kind of return is not enough to significantly grow your wealth over time. So while saving is important for short-term goals and emergencies, it lacks the compounding potential needed for serious wealth building because you’re not maximizing the potential of your money.
Savings Isn't Enough Reason #3: Missed Opportunities for Investment Growth
One of the biggest advantages of investing over saving is the power of compound interest.
Compound growth means you’re earning interest not just on the original amount you saved but also on any interest or gains made over time. This creates a “snowball” effect where your money has the potential to grow significantly, especially if you start early.
For instance, if you invest $5,000 per year with a 7% annual return, after 30 years, you could have over $500,000. In a regular savings account with a low interest rate, you wouldn’t even come close to this amount.
Simply put, money that’s simply saved rather than invested misses out on the power of compounding growth - a core principle behind wealth accumulation.
Savings Isn't Enough Reason #4: Savings Alone Don’t Account for Financial Goals and Life Changes
Many of life’s big financial goals - like buying a house, paying for children’s education, or retiring comfortably - require more than what a savings account can provide.
Planning for these goals typically involves a multi-layered approach, including a mix of investments, insurance, and other financial tools that can grow and adapt over time.
With the rising cost of living and future uncertainties, a savings-only strategy limits your options and resources available to fund the kind of life you want.
Diversifying your strategy with investments in addition to saving allows you to build a financial cushion for these goals without needing to compromise.
Savings Isn't Enough Reason #5: The Value of Building Multiple Income Streams
Savings are foundational, but wealth and true financial independence are built through increasing income streams and acquiring assets that appreciate over time.
Many women find that diversifying their income through side hustles, freelancing, or even starting their own businesses can provide a faster path to financial freedom.
Having multiple streams of income means you’re not solely reliant on your primary job or savings, and it can create opportunities for accelerated wealth-building and financial security.
Key Takeaway
Savings are essential, but they are just one piece of the puzzle. To achieve financial independence and build true wealth, it’s important to incorporate investments, diversified income sources, and a strategic financial plan that aligns with your life and goals.
The Power of Investing and Compounding Growth
When it comes to building wealth, investing is where the magic truly happens.
Investing is what helps you reach new financial heights while saving your money is an essential foundation.
Especially when paired with the power of compound growth, investing can completely transform your finances.
Let’s talk about it.
What Is Compounding, and Why Does It Matter?
Compounding is essentially “earning returns on your returns.” Meaning, when you invest, any interest, dividends, or profits you earn can be reinvested, leading to more returns in the next period - called a “snowball effect”.
Over time, this can lead to exponential growth, especially if you start early and let your investments grow.
So, let’s say you invest $1,000 in an account that grows at an average of 7% per year. If you reinvest your returns, that initial $1,000 can grow to almost $2,000 in 10 years and $4,000 in 20 years.
By starting early, even small amounts can add up to significant wealth over time, all thanks to the power of compounding.
Use Investing as a Tool for Beating Inflation
Inflation is a force that erodes the value of your money over time. By investing in assets that have the potential to grow faster than inflation - like stocks, mutual funds, or real estate - you can protect and increase your purchasing power.
For example, if inflation averages 3% annually, your investments need to grow at least that much to maintain your money's value.
But with the potential for higher returns, investments can help your money outpace inflation and grow significantly over the long term.
There are a Variety of Investment Options Available to You
Many women find investing intimidating, but the good news is there are many ways to get started, no matter your comfort level or experience.
Here are some of the most popular investments and their potential benefits:
Stocks: Representing ownership in a company, stocks have historically offered higher returns than most other assets. They’re ideal for long-term growth, though they can be volatile in the short term.
Bonds: A more stable, fixed-income investment, bonds are a great way to balance out the risks of stocks.
Mutual Funds and ETFs: These funds pool money from many investors to buy a diversified portfolio of assets, helping reduce individual risk and making them accessible to beginner investors.
Real Estate: Investing in property can provide both regular income and long-term appreciation, making it another popular choice for wealth-building.
Choosing the right mix of these investments based on your goals, timeline, and risk tolerance can put you on a sustainable path toward financial independence.
Start Small and Be Consistent
Many people think they need a lot of money to invest, but truth be told - you really don’t. You can start with small amounts and build over time.
And, thanks to the magic of compounding, even modest contributions can make a big difference if invested consistently.
Let’s look at an example: If you invest $100 each month in a diversified fund that earns 6% annually, you could (potentially) grow your money to over $23,000 in 10 years.
Automating your investments would help even more because you would set up automatic transfers to your investment accounts without having to 1. worry about manually moving money and 2. Risk spending the money before investing it.
Patience Is Key. Stay Focused on the Long Term
Investing is about playing the long game. Yes, market fluctuations can be unsettling, but historically, long-term investments tend to recover and grow despite short-term ups and downs.
If you stay focused on long-term goals, you will give your investments the time needed to compound and grow.
And, please, please do not try to “time the market”. This can often lead to missed opportunities and potential losses. Only consistency and patience are crucial for maximizing growth.
Key Takeaway
Investing, especially when combined with the power of compounding, is one of the most effective tools for growing wealth over time.
By understanding how to harness these forces, you can set yourself on a solid path toward financial growth and independence.
Increase Your Income to Expand Your Wealth-Building Potential
Building wealth often requires more than simply saving and investing your current income. Increasing your earning potential can be a powerful way to do this as it can help accelerate your money journey.
That's because more income allows you to invest more, save more, and potentially reach your financial goals faster.
So, if you can boost your income, strategically, you can start seeing a bigger impact on your finances.
Let's talk about things you can do to increase your income:
#1: Leverage Your Existing Skills for Side Income
One of the quickest ways to boost your income is by leveraging the skills you already have.
Think about what you’re good at and what others might pay for. It could be consulting, writing, tutoring, design, or even crafting.
Then, think of where you could offer your services. It could be on contract, through your own website, vendor platforms like Etsy, or freelance platforms such as Fiverr or Upwork.
Even if you start small, a side hustle can add up over time. That extra $500 a month from freelancing would add up to an additional $6,000 a year that you could invest, pay down debt or put toward your financial goals. Sounds nice, right?
#2: Seek Advancement in Your Current Job
If you’re working a full-time job, one of the best ways to increase your income is by seeking advancement.
This could mean asking for a raise, applying for a promotion, or expanding your skill set to move up within your organization.
Many women hesitate to negotiate their salary, but it’s important to advocate for your worth. Do some research to understand the typical pay range for your role and responsibilities so, when you approach your employer, you’ll be prepared with data to back up your request and examples of how your work has contributed to the company.
#3: Invest in Skills That Lead to Higher Earning Potential
Another approach is to invest in skills or certifications that increase your earning potential.
Look at fields or skills that are in demand and align with your interests, such as project management, data analysis, digital marketing, or coding.
While investing in a course or training program has upfront costs, it can lead to a significant payoff if it allows you to move up in your career or pivot to a more lucrative field.
For instance, if you’re currently in a marketing role, a certification in Google Analytics or social media strategy could make you more competitive and potentially qualify you for higher-paying roles with your current company or elsewhere.
#4: Explore Passive Income Streams
Passive income is an income stream that doesn’t require active work once it’s set up.
It may take some initial effort but the payoff can provide a steady flow of income in the long term - allowing you to focus on your career or other endeavors.
A few examples of passive income are rental income, royalties from creative work, dividend income and income from digital products such as e-books and online courses.
#5: Consider Entrepreneurship for Long-Term Wealth
Entrepreneurship is a bold but powerful path to potentially increasing your wealth significantly.
As a business owner, you will no longer be limited to a set salary or hourly wage. Instead, your income will grow as your business grows.
Becoming an entrepreneur may mean starting a side business in your spare time or eventually transitioning into full-time entrepreneurship from your current full-time salaried job.
However, it’s important to note that while running your own business may allow you to scale up in ways that traditional employment often doesn’t, there are risks such as start-up costs, limited access to funding, balancing business demands with personal or family responsibilities, and extra pressures affecting both growth potential and work-life balance (just to name a few)
This should not discourage you from starting your own business at all. It just means you need to understand the risks (as well as the benefits) and prepare yourself with a solid plan.
Key Takeaway
Increasing your income is essential for building lasting wealth. Whether through side hustles, career advancement, passive income, or entrepreneurship, there are multiple ways to boost your earning potential.
Remember, each additional dollar you earn can help accelerate your financial goals and bring you one step closer to financial independence.
Spending Intentionally: Aligning Money with Your Goals
Creating wealth isn’t just about how much money you make. It’s also about how wisely you spend.
Intentional spending is a powerful way to ensure that your hard-earned money is working for you and supporting your long-term financial independence.
Why? Because when you align your spending with your goals, you take control of your financial journey and make sure that every dollar counts.
So how do you spend with intention and purpose? Let’s take a look.
Intentional Spending Rule #1: Define Your Financial Priorities
Intentional spending starts with knowing what matters most to you.
Are you focused on building an emergency fund, investing for the future, starting a business, or saving for a big milestone like buying a home? List your top financial goals and think about how your spending habits can support - or potentially distract from - these goals.
For example, if a top goal is to start a business, you want to make sure you align your spending with business start up in mind. You may start allocating funds towards business courses or saving for initial startup costs. That way you are spending money on things you need instead of things you could do without.
Intentional Spending Rule #2: Identify Where Your Money Is Going
It’s difficult to spend intentionally without knowing your current spending patterns.
Tracking your expenses can reveal habits and areas where you may be spending more than you realized and tools like budgeting apps or a simple spreadsheet can help you see exactly where your money is going each month.
After reviewing your spend, identify any areas where you can cut back or redirect funds. For example, you may find that you’re spending $200 a month on subscriptions that you don’t fully use or getting takeout more often than intended.
Redirect a portion of that money toward your goals - like debt repayment or saving for a vacation - so you start making a significant difference over time.
Intentional Spending Rule #3: Create a Budget That Reflects Your Values
Budgeting often gets a bad rap, but when done right, it’s less about restrictions and more about aligning your money with what you value.
Start by setting aside a portion of your income for necessities, savings, and investments. Then, allocate a realistic amount for discretionary spending that supports your lifestyle and makes you happy.
So, if travel is a priority, set aside funds specifically for that instead of feeling guilty about spending it.
Knowing that every dollar in your budget serves a purpose can give you a greater sense of control and satisfaction over your spending.
Intentional Spending Rule #4: Adopt the "Pause and Reflect" Approach
One the most effective ways to practice intentional spending is to pause before making any non-essential purchase.
Ask yourself questions like, “Will this purchase bring me closer to my goals?” or “Am I buying this because I really want it, or because it’s on sale?”
Taking a moment to reflect can help reduce impulse buys and give you more confidence in each purchase. Over time, this practice not only saves money but also trains you to make spending decisions that genuinely support your financial journey.
Intentional Spending Rule #5: Track Your Progress and Adjust as Needed
Intentional spending isn’t a “set it and forget it” strategy. You have to regularly review your spending habits and financial progress to ensure they’re still aligned with your goals.
This might mean adjusting your budget if your priorities change, or setting aside more money toward something that’s become more important to you.
Checking in on your finances monthly or quarterly can help you celebrate your wins, see where adjustments are needed, and stay motivated on your journey toward financial independence.
Key Takeaway
Intentional spending is about aligning your finances with your values and goals, ensuring that every dollar is contributing to your future.
By tracking your spending, creating a values-based budget, and regularly reviewing your progress, you’ll feel more in control and empowered on your path to financial independence.
Remember, it’s not just about saving or investing, but also about spending in a way that truly reflects the life you want to build.
Key Financial Tools to Support Your Money Journey
Building wealth and achieving financial independence takes more than just discipline and budgeting.
Having the right tools can make a big difference in streamlining your efforts, saving time, and making smarter decisions with your money.
From investment platforms to budgeting apps, these financial tools can help you stay organized and motivated as you work toward your financial goals.
Let’s talk about essential tools you may want to consider incorporating into your money management tool box.
Budgeting and Expense Tracking Apps
One of the most fundamental steps to managing your finances is knowing where your money is going.
Budgeting and expense tracking apps are powerful tools that help you keep tabs on your spending and ensure you’re allocating funds toward your goals. We recommend finding an app that lets you categorize expenses, set savings goals, and track progress in real time.
These apps also let you set customized budgets, get notifications when you’re nearing limits, and review monthly spending summaries to spot areas for improvement.
Over time, they’ll help you make more intentional spending choices and prioritize what really matters to you.
Investment Platforms
Investment platforms make it easier than ever to start investing, even with small amounts.
If you’re new to investing, consider robo-advisors that create portfolios based on your risk tolerance and long-term goals. (Robo-advisors are automated investment advisors that use information you provide to create a specific financial plan and automatically invest for you.)
These platforms automatically rebalance your portfolio and optimize for tax efficiency, allowing you to grow your wealth with minimal effort.
Or, if you’re more interested in self-directed investing, look for platforms that offer tools to trade individual stocks, ETFs, and mutual funds.
These platforms will provide you with resources, charts, and data to help you make informed investment decisions.
Regardless of platform, just remember that investing regularly, even small amounts, is a key step to achieving financial independence.
Retirement Planning Calculators
Retirement may feel like a distant goal, but planning for it early can ensure that you’re prepared.
Using retirement planning calculators is a great way to estimate how much you’ll need to save and invest to achieve your desired lifestyle in retirement.
Look for calculators that can help you project retirement savings based on your income, expenses, and savings rate - instead of using general assumptions.
This way, you have a clear picture of what your current savings strategy will yield in the long term and highlight any adjustments you may need to make.
Remember, knowing your target retirement savings allows you to work backwards and set achievable goals in the present.
Credit Monitoring Services
Good credit is essential to accessing loans, securing favorable interest rates, and even qualifying for some jobs.
Look for credit monitoring services that allow you to check your credit score regularly, monitor for identity theft, and receive alerts when there are changes to your credit profile.
Many of these services are free and offered with your current bank accounts or credit cards. You’ll get tips on how to improve your score, along with insights into what’s impacting your credit.
Staying on top of your credit score can save you money in the long run, as higher credit scores often lead to better rates on mortgages, car loans, and other financing options. Plus, credit monitoring is a key step in protecting your financial health.
Financial Goal-Setting Apps
If you’re someone who likes to visualize progress, financial goal-setting apps can be motivating, making saving fun and rewarding, especially when you reach those milestone moments.
Look for apps that allow you to set specific savings goals - whether it’s for a vacation, a business startup, or an emergency fund - and track your progress over time.
Many apps even round up your everyday purchases and deposit the change into your goal, helping you save passively.
By setting measurable goals, you can create a roadmap for each of your financial aspirations and goal-setting apps can help you stay focused and energized while working toward your goals.
Tax Preparation Software
Staying on top of your taxes can save you money and help you make the most of tax deductions and credits.
Tax software can simplify the tax preparation process by guiding you through the process step-by-step - ensuring that you’re taking advantage of all eligible deductions and credits and filing accurately, which reduces the risk of costly errors. Some of the most popular tax software is TurboTax, H&R Block, and Jackson Hewitt.
If you’re a business owner or self-employed, tax software can help you track income, expenses, and estimate quarterly taxes.
Keep in mind that leveraging tax tools is a way to optimize your finances, ensuring that you’re not overpaying and that you have a clear record of your earnings.
Key Takeaway
With the right financial tools, you can streamline your journey toward wealth and independence.
Budgeting apps keep your spending in check, investment platforms grow your wealth, and credit monitoring protects your financial profile. Retirement calculators, goal-setting apps, and tax preparation software round out your toolkit, allowing you to plan and save efficiently.
As you incorporate these tools, remember that each one plays a role in supporting your financial independence. Use them consistently, stay engaged with your financial goals, and watch as you make progress toward the life you envision.
Building Wealth Beyond Savings Alone
It’s clear that while saving is essential, it’s not enough on its own to build real wealth or achieve financial independence.
Yes, savings give you stability and security, but in order to build wealth beyond savings, you need to go a step further. By understanding the power of investing, looking for ways to increase your income, spending intentionally, and leveraging financial tools, you’ll set yourself up for a future that goes beyond just getting by.
But it’s important to remember that achieving wealth isn’t about sacrificing every little luxury or relying solely on a high-interest savings account.
Instead, it’s about making strategic choices with your money, taking calculated risks with investments, and growing your earning potential.
Wealth-building is a journey and one that’s entirely achievable with the right approach and mindset.
So, here’s your call to action: take a look at your current financial habits and see where you can make these changes.
Start small, stay consistent, and keep learning along the way. Whether it’s diving into your first investment or taking on a side hustle, each step brings you closer to your financial goals.
You’ve got this – and your future self will thank you for it!
Ready to embrace your inner CFO? Join our community. Share your financial goals, budgeting tips, and success stories in the comments.
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