The Beginning of an Overcommitted Investor: Breaking the Myth of Savings for Financial Growth

Why I Started Investing: The Moment My Sense of Crisis Changed Me

1. The Belief That Savings Was the Only Answer

Growing up, I believed in the financial philosophy of my parents’ generation: “Money grows by keeping it in the bank.” My father, in particular, firmly held the view that “investing is gambling.” As a result, I internalized this belief as an unquestionable truth.

To me, saving money symbolized security, and watching the numbers in my bank account grow was proof of responsible money management. As a young professional earning around 200,000 yen per month, I diligently increased my savings without ever considering alternative ways to grow wealth.

2. The "High Interest Rate Era" of My Parents' Generation

However, the environment surrounding saving during my parents' time was entirely different. From the 1970s to the 1980s, Japan experienced what is now referred to as the “high interest rate era.” During this period, bank savings and fixed deposits yielded significantly higher returns compared to today.

Interest Rates of the Time

The table below highlights the average interest rates on ordinary savings and fixed-term deposits in Japan during this era:

• Ordinary Savings Interest
  With rates of 2–3%, depositing 1,000,000 yen in a savings account would yield an annual interest of 20,000–30,000 yen.
• Fixed-Term Deposit Interest
  Fixed deposits offered even higher rates of 6–8%, allowing 1,000,000 yen to generate 60,000–80,000 yen in annual interest.

For my parents’ generation, this environment made saving a risk-free and highly rational strategy for growing wealth.

3. The Reality of the Ultra-Low Interest Rate Era

In contrast, the financial world I live in is completely different. Following the economic bubble collapse in the 1990s, Japan entered a prolonged period of ultra-low interest rates. By 2018, the interest rate on ordinary savings accounts had fallen to an astonishingly low 0.002%.

Example: Annual Interest on 1,000,000 Yen in Savings

• 1970s (2.5%): 25,000 yen
• 2018 (0.002%): 20 yen

Moreover, interest earnings are subject to a 20% tax, reducing the already meager returns further. This stark reality hit me hard.

4. Why I Clung to My Parents' Beliefs

Looking back, I realize my adherence to the belief that “savings is best” was heavily influenced by the world my parents grew up in. Back then, bank interest rates were high enough to reliably grow wealth through savings alone. Investing, on the other hand, was seen as risky and speculative, something the average person avoided.

However, today's ultra-low interest rates mean that savings grow far slower than inflation, resulting in a gradual erosion of real purchasing power. Despite this, I never questioned the financial lessons my parents imparted, nor did I make any effort to seek alternative ways of managing money.

5. How a Sense of Crisis Transformed Me

The moment I became aware of the near-zero interest rates, I felt an overwhelming sense of crisis. I realized that simply following my parents’ values and passively handling money was no longer viable. For the first time, I took action to educate myself.

I started researching topics like interest rates and inflation: Why were rates so low? Why was interest income taxed? How did inflation affect the real value of money? These investigations led me to a life-changing realization: “Saving alone cannot build wealth.”

This epiphany motivated me to explore investment options. Although I initially felt anxious, the more I learned, the more I realized there were numerous alternatives beyond traditional savings.

6. Marriage Accelerated My Financial Transformation

During this period of self-discovery, a significant life change occurred: I got married. Sharing finances with a partner made it necessary to have more serious conversations about money and future planning.

Relying on my 200,000 yen monthly income to support a family, and eventually children, was simply unsustainable. Even the 1,000,000 yen I had managed to save felt woefully inadequate for long-term financial security.

7. A New Perspective Through My Wife’s Insights

Fortunately, my wife had started investing before I did. She introduced me to concepts like index funds and U.S. stocks, demonstrating that wealth could grow beyond savings alone.

Her ability to take calculated risks to build wealth inspired me to reevaluate my approach. Gradually, I began to understand that risk is not something to fear but rather a necessary component of financial growth.

8. The Futility of Slightly Higher Interest Rates

Recently, there have been discussions about rising interest rates in Japan. However, even with these changes, ordinary savings rates remain capped at 0.1%. At this rate, 1,000,000 yen generates only 1,000 yen annually, reduced to 800 yen after taxes.

This realization reinforced my belief that keeping money in the bank achieves nothing. In contrast, investing offers a pathway to financial growth that savings simply cannot match.

9. The Decision to Start Investing

Motivated by a sense of crisis, the knowledge I gained, and my wife’s example, I finally decided to take the plunge into investing. Defying my parents’ values was daunting, but the fear of doing nothing and risking my family’s future was even greater.

This marked the beginning of my journey as an investor, a decision that has since profoundly changed my life.

Next Week’s Preview: My First Swing Trading Experience

In next Friday’s article, I will share my initial experiences in the world of investing, including my first attempts at swing trading. I’ll discuss how I approached risk, my successes and failures, and the lessons I learned along the way. Stay tuned!

Citations

1. Bank of Japan Official Website
   Comprehensive data on interest rates and monetary policy.
   Bank of Japan Statistics
2. Statistics Bureau of Japan
   Economic indicators and inflation trends.
   Statistics Bureau Economic Indicators