Saving is very important for your current financial health and your financial readiness for the future. Because saving can help you reach short-term and long-term financial goals. Let’s learn from the pandemic we are currently facing how important it is to have an emergency fund. And, emergency funds can be built if saving consistently.
Saving is not only about money. Saving may take the form of investing in gold, precious metals, and others. In fact, for the long term, saving in gold will be more profitable than saving in money because its value will not be eroded by inflation.
In addition to its value, which rarely changes–particularly declines dramatically, gold savings are also an investment option with a level of risk that tends to be easily managed. And, currently, having gold savings is quite easy. We can open a gold savings account like opening a conventional financial savings account at a bank, it can even be done offline or online. Opening a gold savings account does not require large capital. We can start from just 0.01 grams.
Here are the pros and cons of gold savings that can be considered before deciding to open a gold savings account.
Pros of Gold Savings
- Asset values tend to be stable
As mentioned earlier, the advantage of having gold savings is that the value of gold assets tends to remain stable over time. One of the contributing factors is a coherent supply and demand in the market. Because, apart from being an investment instrument, gold is also considered to play a role in complementing one’s lifestyle. So, as long as gold transactions on the market are still going strong, the risk of falling gold prices is quite minimal.
- Easily disbursed in cash
The nature of gold savings investments which resemble conventional savings, allows you to easily cash out your assets in gold savings. In both physical and digital forms, gold’s existence as a type of precious metal is recognized for its legitimacy in almost the entire world. Hence it can be liquidated easily anywhere in the world.
If you make other investments besides gold, the value received when you liquidate the assets tends to have a significant difference from the value of the assets owned due to interest. However, not with gold. Transactions in gold savings tend to follow sharia law which are free from interest. So, if you sell the asset, the value of the gold disbursed will be equivalent to what you have in your savings account.
- Can serve as an emergency fund
As with conventional savings, gold savings can be considered a source of emergency funds or perhaps retirement funds. Moreover, the value tends to be stable and easily converted into cash. However, to invest in gold for an emergency fund, you need to allocate income per month regularly. There are two strategies to add value to gold savings that can be chosen according to your ability.
- Dollar Cost Averaging Strategy (DCA)
In principle, DCA is a buying gold strategy by investing the same value on the same date consistently. For example, with an income of IDR10 million per month, 10% is allocated for gold savings with a gold purchase target of IDR10 million. That means every month, for example on payday, you have to invest IDR1 million in gold consistently until the target gold value of IDR10 million is reached. Saving gold using the DCA method does not need to wait for the price of gold to fall or it is not affected by the ups and downs of gold prices.
- Constant Share Strategy
With a constant share strategy, you purchase gold of the same weight regularly, not its value of money, for example, buying 1 gram of gold every month. The main advantage of this strategy is that you can easily calculate the value of your asset within a certain period.
Cons of Gold Savings
- Act as a long-term investment
Gold savings have properties that tend to be identical to conventional savings. That means, the increase in the value of your gold savings is influenced by your saving behaviour. If you often increase the amount you deposit in your gold savings, then the value of the assets will also be greater. However, if you are considered passive, the benefits of having gold savings will only become apparent in the long term.
- There are administration and storage fees
The first time you open a gold savings account, you will be charged a gold deposit fee. This gold deposit fee usually has a certain time limit. If the validity period has expired, the gold deposit fee will automatically be extended by deducting the balance from the gold savings account. In addition, for every purchase of gold, you will also be charged an administration fee from the gold dealer.
So, what are your reasons and considerations for investing in gold? Is it because it’s affordable? Or because it’s the ease of transaction? Whatever the reason, the key is to consistently allocate your income per month.