The Future Saving Money as a Store of Value: Store of value refers to the asset which maintains its original value without any depreciation, or we can say it is something that retains its purchasing power in the future. It can be exchanged or retrieved any time, and it will be useful at the time of retrieval too.
Gold and all other metals are a famous example of good stores of value. Their property never fades away, and lives remain eternal. However, items used in daily routine such as milk, sugar are bad examples of the store of value because they have a specific period after this, they start decaying and eventually lose their quality.
Interest-bearing assets, such as U.S. Treasury bonds (T-bonds), are excellent stores of value because they generate interest income and legal contracts back their principal balances.
Understanding The Store of Value
Wealth preservation plays a vital role. It serves as a base unit for health, economy, and of course, its role in forming monetary group or currency cannot be ignored. Whole economy transactions lie on money for exchange for goods and preservation of the value of a business’s accumulated labour.
We cannot trade, or economical save the monetary unit, which serves a poor store of value. Thus a credible and sustainable source is needed to engage in any trade.
Trading in precious metals like gold, silver, and other metal is usual since the earlier times because of their ability to store value, ease in transportation, and their ability to get deform into any denomination.
Until 1971, the United States followed gold standards. In this, the dollars were exchangeable for a fixed weight of gold. This dollar convertibility ended after the reformation strategy of President Richard Nixon. This decision gave power to the Federal Reserve to dominate the inflation and rates of employment. Since 1971, the U.S. has used a fiat currency (legal tender declared by the government).
Others Stores of Value
Different countries can mark them according to their wish. Most of the globally advance economies mark their local currency as a store of value. Stable currencies intensify their home economies greatly. It includes currencies such as the Japanese yen, the Singaporean dollar, the Swiss franc and most importantly, the U.S. dollar.
But this store of value can come under attack when hyperinflation occurs.
[Hyperinflation refers to the excessive or rapid increase in the general price in an economy. On the other side, inflation measures the rate of rising in the value of goods and services. Rapidly rising inflation is hyperinflation, typically weighing more than 50% per month.]
In this case, other stores of value, such as silver, fine art, gold and real estate, have proved their reliability over time. Their relative value fluctuates over time, but they never lose it in any scenario, especially in the cases where there is a finite supply for these store of value such as gold.
Particularly for the gold, its price reaches the height in the time of national jeopardy or when a financial breakdown hits the market and thus it leads to increase the demand and worth of other stores of value.
In modern times the most famous store of value is currency, money, a commodity like financial capital or precious metal. The main point involved with the store of value, which makes it suitable for the holder is its risk management factor. The demand for this underline asset remains stable.
Money serves as the best example for value store because of its liquidity
(Easily exchange for other goods and services).
The wealth of an individual is the aggregate of both non-monetary assets and monetary assets. One should always try to build a strong economic and financial foundation; this might not appear profitable instantly but in future pays a lot in the time of crisis. So, store things which have high value and can pay you off when required.