Saving vs. Investing: Which is Better?
There comes a point in your life where you are faced with difficult choices, and one of these is to choose between saving and investing. Although both can be done simultaneously, but to be honest, as far as being responsible is concerned, having to manage two types of financial matters can mean having too much on your plate. That is why you need to figure out which is better between saving and investing so you can start immediately and reap what you sow.
The first thing you need to do is to know the difference between saving and investing. In that way, you will be able to place your financial status and needs in line with whatever way is best for you.
Saving leans on the short-term goals where you can have a ready-to-go money for smaller activities that you’d like to do in the near future, say three or four years. This includes going on vacation or having money in case of an emergency. This means that you have access to your savings whenever you need it. This causes minimal risk for your money because your funds are insured by the bank. Aside from that, you can also earn interest albeit generally lower compared to when you invest.
Investing, on the other hand, goes for the long-term commitment where you can achieve major financial goals. Take for example when you invest in real estate, you will be able to save for your child’s college education and not just for some summer trips. Although the risk in investing is higher than saving, it has the potential for higher returns. This risk eventually leads to your net worth increasing as you make profits for selling your property for a higher price than you invested initially.
Saving usually goes out for purchases and emergencies. You save for things such as vehicles to ride on, or holiday trips to enjoy in a few months; basically things that are available as soon as you need them, where lower risk is entailed. It involves tracking your savings and putting a deadline to reach your goals. Say for example you are saving for your annual family trip; you need to earmark a certain amount to save in a specific period of time in order to know how much you are going to save monthly.
Investing wisely results to better returns. Small investors in larger projects know that it’s crucial to invest early and wisely. Although, again, this opts for a higher financial risk, the harvest could be overflowing. People who invests in real estate should be patient, besides, you know how the old saying goes, “good things come to those who wait.”
Saving keeps your money safe but gives you very little return. This means that you put your money aside, usually into a bank account, and let it sit and wait until you need to spend it on smaller things like paying for a car, house deposit, or any emergencies that you need to take care of immediately.
Investing makes money for you. When you invest your money, your goal is usually to make it grow and multiply. The things you need to know in investing in real estate allows you to gain properties and assets in which value increases overtime. This allows you to have the opportunity to earn more money than you originally saved.
Whether you are saving or investing, there are some factors that you need to consider.
First is your attitude towards the risk. If you want to play on the safe side and are contented with what you have now, you should save and keep your money safe away from risk. If you are more of a financially adventurous and patient person, investing is the right way for you. Investing in real estate, especially, can help you earn double or even triple the amount you saved.
Second is your financial status. When you’re in debt, out of emergency funds, just went through a recent financial crisis or a major life event, saving could be the best passage for you. However, if you’re in your 30s and you’ve got all the money in the world and you’d like to retire comfortably in about 30 years, investing is the best way for you to take. You can look up to real estate investors on that side of the coin.
Third and last thing to consider is your financial goals. If you intend to buy a new car or put down a deposit on a house, saving for like three years would be a great idea. On the other hand, if you want to pay for your child’s college or wedding fifteen years into the future, investing would fit you best.
To sum it up, if you want your money untouched for specific small occasions, then you need to save. But if you want to see your money grow and multiply into the future, you have to invest. Now, you decide which is better; to let your money sleep or to let it move and do some work?
In the end, deciding whether to save or to invest depends entirely on your goals and financial situation. You need to be sensitive enough and financially aware and wise as to which path to take. But ultimately, saving money should almost always come before investing money. If investing is your ultimate goal, saving money would most definitely take you there. But remember, don’t wait too long to invest; the best time is always now!