I was always fascinated by my Mother’s frugality and savings oriented lifestyle. She always seemed to have money available to help people and help out my dad when things were tough. Later in life she even opened her own bank account and faithfully put money away for a rainy day. She never worked a day of her life and was able to save from the allowance my Dad gave her. Obviously this gives away in what era they lived.

Some people might scoff at this but many people still live this way. Holding cash to be available for a rainy day. This was also the reason for her investment downfall. She was very conservative and never wanted to take any investment risks. She wanted to see the interest (albeit almost nothing) every month on her banking statement and it gave her great pleasure that her money “always grew” as she put it.

When she opened the bank account there were virtually no inflation and she never understood the silent killer nature that inflation has on people’s money. The fact that her capital was guaranteed was like heaven to her. The ravishing effect that inflation had on her financial well-being only occurred to her when it was too late. The buying power of her capital (and paltry interest) soon declined so much after my father’s death that she was dependent on others for her financial well-being. This caused tremendous stress at a time when someone can ill afford it.

With hindsight it is very easy to criticize her, but so many people today have the same attitude towards money – as long as my capital is guaranteed, I will be well off. It is only when it is way past midnight that the reality of this folly hits home and then there is often not enough time left to rectify the situation.

Capital appreciation (that beats inflation) is always necessary, whether you are 20 or 80. The only asset classes that will realistically provide the much needed capital growth is equity and property. The person at the age of 80 might well live another 20 years, so proper planning is of the utmost importance, making sure you don’t have more life left at the end of your money.