Money begets money is the focus of financial management. If you deposit all the money you have saved in the bank, you will face a problem: in the long run, the interest rate on bank deposits cannot keep up with inflation, which means that your money will depreciate in value. If you invest all the money you save in risky investments, you may outperform inflation, but you may also lose money. So, how should we allocate and use the money we have? I suggest dividing the money in your family's "reservoir" into three parts and putting them in three pools. The first pool contains emergency money, the second pool contains life-support money, and the third pool contains spare money. The reason why I divide it this way is based on the three attributes of investment. The three attributes of investment are: liquidity, safety and profitability. Emergency money corresponds to liquidity, life-saving money corresponds to safety, and spare money corresponds to profitability. Let’s take a look at what each of these three types of money is used for: Emergency money. Emergency money is used to deal with unexpected expenses such as unemployment and family illness. Generally, families should keep one year's worth of living expenses as emergency money. Emergency funds can be used to invest in short-term bank savings, short-term treasury bonds, money market funds, short-term capital-guaranteed bank financial products, short-term capital-guaranteed securities dealer financial products, etc. These investments have low returns, but are highly liquid and can be cashed out at any time without losing money. Life money. Life support money includes your own pension, children’s education expenses, etc. The average family should keep at least 3 to 5 years of living expenses as life support money, and as you grow older, more life support money should be saved. By the time you retire, you should have 20 years of living expenses (taking into account inflation factors ). Life-saving money is mainly used to invest in bank regular savings, medium and long-term treasury bonds, bond funds, social insurance, savings-type commercial pension insurance, corporate bonds, capital-guaranteed bank financial products, capital-guaranteed securities dealer financial products, etc. These investments have a fixed income, a moderate rate of return, and are very safe. Spare money. Idle money refers to the idle funds that a family has not used for more than 5 years. If you are a retired elderly person, it means idle funds for more than 20 years. This money can be used for risky investments, but it is not necessary to make risky investments. The money can be used to invest in stocks, stock funds, real estate, gold, foreign exchange, investment-linked insurance, non-capital-guaranteed bank financial products, non-capital-guaranteed brokerage financial products, private equity funds, QDII products, collectibles, etc. These investments may bring higher returns, but they may also result in losses. When we use our spare money to invest, it is like digging a deep well next to a "reservoir" so that the water in our own "reservoir" can be continuously replenished. Protecting money is the guarantee of financial management. It is not enough for us to just rely on saving and making money, because it is possible that due to an accident (illness, work injury, car accident, accidental liability), your family's "reservoir" will burst, causing a large amount of money loss or even total loss of your family's money. Therefore, we need to build a dam outside the "reservoir". The so-called building a dam means buying insurance. These insurance products include: term life insurance, accident insurance, critical illness insurance, medical insurance, etc. When you encounter an accident, insurance will provide you with compensatory funds to help you survive the financial crisis. To sum up, the method of financial management can be summarized as "one center, three basic points": managing money as the center, saving money as the starting point, making money as the focus, and protecting money as the guarantee. Extend it to the eight-character policy of financial management, which is: manage money, save money, generate money, and protect money. A visual explanation of the eight-character policy for financial management forms a nine-character motto for financial management: build a reservoir, dig a deep well, and build a dam.