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People invest money in order to increase their future wealth. By giving up some current consumption, people hope to have more wealth available to meet their future consumption needs.
Some people have more specific reasons for investing. Some invest in order to supplement their current income. Others make investment decisions to reduce their current and future tax liability. Many people invest in order to accumulate sufficient funds to buy a car, send their children to university, make the down payment to purchase a house, or to retire comfortably.
It must be noted that an investment can mean different things to different people. The range of investment types runs from savings accounts and money market funds to stocks and bonds to real estate and collectibles. Basically, any asset that is purchased primarily in expectation of earning a monetary reward can be considered an investment.
Investment is a key part of any individual’s personal financial plan. Simply put, it is very difficult to imagine achieving many major personal financial goals without investing.
At the very best, inflation must be considered. For example, in 20 years the cost of a university education could easily be $40,000 a year. Will a person have sufficient current income or savings to meet this expense for his children? He probably would not unless he starts investing some of his money today.