Invest Or Save: Which One Is Right For You?
The question of where you should invest your money or whether you should be saving is a common one. Ultimately, it all depends on what you are trying to achieve and what situation you are in financially. In fact, investing can indeed increase your savings, however, you should consider a number of factors when determining whether investing makes sense for your current situation.
Take a look below for a quick guide that should help you decide whether you should focus on short term savings or long term investing with your money:
How Do They Differ?
Saving is just the act of setting aside a small amount of money on a regular basis, as often as you are able to. The reason you’re usually saving is for a specific purpose such as a family holiday, a down payment on a house, an emergency fund, or maybe just to get by during the year. You might use tools like a savings account or a building society account in order to collect your savings. Investing is when you make use of some of your money in order to try and grow it. As a matter of fact, people are also taking advantage of this new option, in that they are buying things that are likely to increase in value so you can get a return on your investment, such as looking at the best stocks to buy now.
Fund For Emergency Situations
There are a number of reasons why everyone should think about establishing a savings account for emergencies. If possible, you should have put away a minimum of three months’ worth of living expenses in an account that offers instant access to your funds. Make sure that you include the essentials such as food, rent, mortgage, school fees, and any other outgoings that are essential. By being able to have financial security, you are putting yourself in a position to survive any kind of disaster.
Save And Continue To Save
It is important to keep saving and building on the funds you have saved once you’ve completed the goal of creating an emergency fund. The absolute minimum amount of money you should try to save on a monthly basis is 10%. The biggest mistake I see people making is not to save as much as they can. It does not matter how little it is, save as much as you can. Setting yourself a goal is an excellent way to make money, and the next step would be aiming to collect enough money to meet your goal. However, you should be careful not to get tempted into using your emergency fund.
Instead of saving for a wedding, house, or car, this may be a good time to consider investing your savings, as you are likely to receive a return on your money when you invest.
There Are Times When You Shouldn’t Be Saving
It is wise to try to save as much money as possible unless there is a dire need for your money elsewhere. There are some things you should not save money for if you have to pay for something important. Getting your finances under control includes areas such as getting your debts under control. Prior to saving money, it is important that you take care of these matters first. Payment plans may still give you the opportunity to save an emergency fund even if you already have them in place.
When Is It The Right Time For Investing?
How you answer this question is entirely up to you.
The short-term goals you have for the next five years. A savings account is usually used for bank accounts.
Plans for the medium to long term, 5 to 10 years. Depositing cash is probably the best option, however, if you want to take a risk, you can invest and get a better return. Taking the risk when saving for an important purchase, such as a house, is not recommended.
Investing and releasing funds every decade around retirement can be considered a long-term goal. Investing doesn’t require you to take the money out for at least ten years, it’s more common to take it out for more than ten years.
It is always a good idea to make sure you know what you’re doing when investing and maybe talk to a financial advisor. Don’t forget that investment cannot be guaranteed.
What other advice would you like to give about investing versus saving? If you have any suggestions for this article, please share them in the comments area below.