What does ‘Make your money work for you’ mean?

The rich and successful people put their money to work by investing.

This was a habit my father taught us from a young age and it helped even more when both my father and Fahd’s were experienced in the field of Islamic Banking and investments.

Our fathers told us that the average person, regardless of age, religion or ethnicity, do one of two things when they get paid;

  1. They spend it
  2. They save it in a savings account

Thinking about this, one day, I asked my father, ‘Why should I bother saving? Shouldn’t I invest all my money?

He said; ‘How can you learn to invest over time if you do not have the structure to save money, enough to cover 6 months of expenses. They both go hand in hand.’

He then explained to me, if all you do is save your money every month, your money hardly grows, in fact, your money loses value over time.

‘The trick is to save and invest you money, making it work over long periods, and the earlier you start investing the better’, he said.

He then showed me some scenarios of what could be possible.

I recall them clearly, even today, and more so from being in the process of experiencing it now with Fahd.

Scenario 1

He said; ‘Imagine, you decide, instead of investing $1200 every month, just to put all the money into a savings account, which pays a profit (wakala) rate of 1.3% p.a. (this imaginary islamic bank is being very generous). Let’s say you did that from when you turned 32, until you were 60. After 28 years, this is what your money would look like.’

Scenario 2

‘Now imagine, you chose to put $1200 every month into an ethical fund instead of researching and picking your own companies. The average fund returns is 6% p.a. If you did that till you were 60, this is how your money has worked for you.’

I said ‘That’s not bad at all!’,

‘Patience, my boy, we’re getting somewhere, I have one more scenario for you’, he replied.

Scenario 3

‘Now let’s say you take the amount of $1,200 every month and do something that takes a little bit of learning and work, but it’s what only 5% of people do’ . invest the same amount of money and do what 95% of the population is not doing.’

‘What is that?’, I asked eagerly.

‘You research and study companies that are halal and have the makings of good investment opportunities. You learn and go through the financials of these companies and invest in the best ones. You can expect an annual return of 11-15% p.a.’

‘Want to see what a 11% growth looks like when your money has worked for you till you’re 60?’

Needless to say, I nodded with excitement.

Goes to show, a little bit of effort consistently will reap the benefits.

This is the core of what we try and teach at Tabarruk, our philosophy of making our money work for us to get the best returns, ethically.

This is not financial advice. Please read our disclaimer.