Savings Vs Investments

 

Both saving and investing are essential requirements in building a solid financial foundation. As much as they are both geared towards financial success, they don’t mean the same thing. Thus, it’s necessary to know the difference and also know the appropriate time to use a piggy bank, or to procure or purchase an asset with a potentially high ROI.

Put simply, saving is the putting away of money in order to cater for a future expense or expenses. The idea in saving is to have the money available when it’s needed. Also, saving is a medium through which long-term financial goals are met.

It is commonplace for savers to deposit their money in bank accounts with very low risks. More so, they could also take it a step further by using the highest annual percentage yield (APY) savings account that’s available if they’ve proved their eligibility by meeting the minimum balance requirements.

On the other hand, investing shares a similarity with saving as it involves putting away money for future purposes. The only difference is the investor is expecting a potential higher return while taking up the risk of loss. Typically, people invest in stocks, digital currencies, bonds, mutual funds, and the likes.

More so, invest what you can afford to lose and think on a long-term basis.

There are numerous reasons you should save your money as it comes with the following advantages:

.  It is very easy to do and it doesn’t cost you anything to begin
.  Savings accounts ensure the saver is aware of the interest he/she will generate from his/her balance while saving
.  Savers can access their money as soon as they need it.
.  There are very minimal fees involved

On the other hand, the downsides of saving are:

.  You get low returns. Making investments has more potential in earning higher returns (although, it isn’t promised).
.  You’ll gradually lose your purchasing power when inflation comes knocking as your money’s worth will plummet.

The advantages of investing include:

.  You can get higher returns from it, unlike saving.

.  With a diversified investment collection you could weather the lingering inflation and enhance your purchasing power

.  Many common investment products such as bonds, and stocks are liquid, and they could be changed to cash in almost every day of the week.

The disadvantages of investing include:

 

.   Making profit isn’t promised as you could lose your entire capital

.   You may need an investment expert given how complex it can be

.   It may cost you higher fees to make an investment

Both saving and investing are essential and one isn’t better than the other. It simply depends on your current financial situation. You have a plan that needs finance? Save up for it. You have some money you can afford to lose? Invest wisely.

If you are looking for a professional hand to walk you through on how to make wise investments and really grow your financial life, Forward Edge Consulting is here to serve you. Given our affiliations with prominent individuals and organizations, we have the financial resources to train and build you up.

We already have the balanced diet of financial education you need to succeed. Reach out to us and be on your way to a whole new financial reality.

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