Your Money and its Best Friends Forever!
We've probably heard someone declare they don't care about money at some point in our lives, and we may have even said it ourselves. While this idea is good in theory, the fact is that — for better or worse — we should not underestimate the value of money.
Money cannot purchase happiness, but it can provide protection and safety for you and your family. Because money is required to get the goods and services you require to survive, understanding personal finance is critical. You must be prudent with your money and save enough for the future to ensure you have enough when you can no longer trade your labour for money.
With this, we have established the fact that MONEY IS IMPORTANT. If money is necessary, we must do everything we can to treat them just about right, i.e. making it Grow. One of the best ways to do so is uniting it with its best friend. But who are your money’s best friends - Saving, Investing, or both? Let us try and find out.
Saving and Investing
- The majority of people confuse saving and investing. While many use the terms interchangeably, they are as dissimilar as chalk and cheese. Our "savings" are the difference between monthly income and expenses.
- However, when we multiply our savings by investing in other asset classes such as stocks, bonds, real estate, or gold, we produce wealth by "investing."
- To build a solid financial foundation, saving and investing are both important. However, while both can help attain a more secure financial future, we must understand the distinctions and when it is better to save versus when it is best to invest.
What makes Saving and Investing similar?
- Saving and investing are comparable since they help you acquire money for future use. Savings and investments have a monetary value residing within financial instruments. To save money, both use specialised accounts at a financial institution. And in financial planning, you examine your financial goals.
What makes Saving and Investing Different?
- Savings differ from investments in the sense that savings are often deposited into a bank savings account or a fixed deposit. Investing, on the other hand, is purchasing assets such as real estate, gold, stocks, or mutual fund shares that have the potential to increase in value over time. Some of the highlights of the difference are listed down below.
|Goal||Savings are for the short term, are used for emergencies and purchases, and can be done quickly.||Investments are usually made keeping in mind long-term goals. They require a little market research is needed|
|Shield from Inflation||When inflation rises, the value of cash in a savings account falls.||Investing is a fantastic financial product against inflation.|
|Returns||Savings often yield a defined and consistent rate of return.||Investments, on the other hand, have the potential to produce far more significant returns.|
|Risk||Savings instruments such as FDs, RDs, and savings bank accounts have very low or insignificant risks and will always pay you a consistent interest rate.||Investments pose a high level of risk because their value fluctuates depending on market circumstances and other economic and financial factors.|
|Liquidity||They provide you with fast access to money whenever you need it.||Investments typically provide low liquidity.|
|Mode||Cash, bank saving account, FDs, RDs,||Real estate, bonds, stocks, equity, and mutual funds.|
When should you choose to Save?
- You should save when you have a salary but little or no cash. Set a goal of saving enough money to cover six months of your living expenditures. This safeguards you against unexpected financial crises such as a car accident or job loss.
- Saving is also appropriate for achieving short-term financial objectives. Some examples are buying a home, paying for college, or sponsoring a wedding. If you have five years or less to attain your goal, saving is better than investing.
- Keep in mind that high-interest loan amounts might make saving more difficult. Some will argue that it is preferable to pay off debt before saving. Living without an emergency fund, on the other hand, is dangerous. If you had an unexpected expense, you'd have to borrow more to cover it. To prevent this circumstance, save as much as possible while repaying debt.
When should you choose to Invest?
- Investing entails distributing your money among many non-cash assets. It can help you expand your money in the long run. However, unlike cash, investments can lose value and gain value. Long-term investments are preferable. The market can be turbulent in shorter durations. The shorter your timescale, the less probable you will see the desired results.
- If you have an emergency fund and no high-interest debt, investing your extra money can help you build wealth over time. You must invest if you want to achieve long-term goals such as retirement.
Can you Save and Invest together?
- Of course, you can combine saving and investment. You can save the money you require and invest the money that would be good but isn't required to fulfil your primary aim.
- Another strategy is to start investing toward a long-term goal and gradually transition to saving as the objective approaches. This helps to avoid a rapid reduction in your investment values, which could cause you to miss your target.
Eventually, you must decide if saving or investing is the better option for achieving your financial objectives. And, of course, how and whether you invest, save, or do a combination of the two will most certainly change over time as your priorities and ambitions shift.
Since you share a relationship with your money, you must always keep working to make it work the best for you. You can give your money the proper treatment by making the right decisions for your money at the right time. It’s time that you take charge of your money and might as well do it right. Let Glide Invest be your partner in treating your money well. Download the Glide Invest App and get started today!