What happens to my savings in the bank?


According to figures published by the Dutch central statistics institute (CBS Centraal Bureau voor de Statistiek) consumer prices in 2020 were 1.3% higher than in 2019, a year earlier it was 2.6%, this generalized increase in the prices of goods and services is known as inflation.

As prices rise every year, you can buy less with the same money, although all countries have inflation, in the Netherlands it is much lower compared to the inflation in Mexico, for example, where in 2020 inflation closed at 3.15%.

Due to inflation all money that is stored in the bank or under the mattress will lose purchasing power over time, sad but true.

In a previous post I wrote that banks in the Netherlands give practically zero interest for having money stored with them. A traditional bank’s interest rate of 0.01% is well below the current inflation rate.

Unfortunately in the Netherlands there is no bank or fixed term shorter than 10 years that gives a return above inflation. Keeping money in the bank is not enough to make savings grow more than inflation, if you want your savings to beat inflation then you have to invest.

Investments and the stock market

In Mexico when I heard the word investment I thought it was something only for the rich, something unattainable, things have changed since then and investment options have become more accessible to many people. In this blog I will talk mostly about investing in the stock market, since in my opinion it is the most accessible since you can start with a small amount of money.

There is a lot of information available to consult about the stock exchange but in summary the stock exchange is an institution that can be public or private that facilitates the exchange of different financial instruments (valores in Spanish, securities in English). The most common securities are corporate stocks and debt bonds. If a company requires financing, it can go to the stock exchange to offer shares (parts of its company) to savers, i.e. savers, individuals or institutions seeking to invest their surplus money to obtain a return.

The Amsterdam Stock Exchange is considered the oldest stock exchange in the world, founded by the Dutch East India Company (Verenigde Oostindische Compagnie, or “VOC”) in 1602 to deal in its printed shares and debt bonds.

Almost every country in the world has its own stock exchange, the main ones being in the United States, Europe and Asia, with the New York Stock Exchange being the largest.

How do I invest in the stock market?

In order to access the stock exchange, a broker is required. In the past you had to meet a minimum amount to invest but in recent years this is no longer necessary and it is possible to invest with a few euros and from the comfort of your cell phone many times.

In the Netherlands there are several brokers that allow you to invest from a few euros and with low commissions, for example Degiro or Trade Republic, just register on their platform and you are ready to start investing in the stock market. I will be posting my experience using a couple of them in upcoming posts. If you want to know more information about Trade Republic or open an account you can click on the following link, with this you help to maintain the blog and future articles.

Is it safe to invest in the stock market?

Yes, in terms of the money you deposit with the broker, that is why it is important to always use a broker that is regulated, I will make individual posts on the brokers in the Netherlands and explain how the money you deposit with them is protected.

However, all investments carry risk, and anyone who guarantees you risk-free returns is lying to you. You should only invest money that you do not need in the short term and ideally that you would be willing to lose. With moderate risk, interesting returns can be obtained in the long term. I will talk more about that in the next post. I started investing in 2018 and wish I had started earlier, as time is the best ally in the case of investments.




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