I guess the questions at the top of your mind are why save, why invest?
Such is life, that which happens while we are making plans – another well-worn cliché – so we have to be prepared for the unexpected.
As contradictory as that may sound, it’s the absolute truth.
So let’s get down to it.
As soon as you have settled all your outstanding debt,Be careful of mounting credit card debt it’s time to come up with a saving’s plan. In the practical sense, you should have money at the ready to park in savings account because you are no longer using it to pay off your debt.
So what’s the difference between saving and investing?
Saving is short term and can be used for planned expenses such as an annual holiday, a new computer, upgrading your car etc.
Saving accounts are offered by banks in a variety of terms and other conditions. Some have a minimum or maximum deposit amount in order for you to open an account.
They usually have a fixed term which is helpful if you know in your plan, the exact day of purchase or even smaller milestones along the way. In other words you can track your savings until you are ready to use them for their intended purpose.
These savings are safe as banks as financial institutions are covered by layers of insurance should they run into trouble.
Investing is something to try once you have tired of savings products and their low-yielding returns.
You must be prepared to take on some risk. It usually works that the higher the interest return, the more aggressive the investment and thus it is more risky.
If you can bear the risk you will be rewarded with a high return on your money.
Most investments are long term, so wherever you put your money, you should expect to leave it there for three to five years for the highs and lows of the total investment to even out to a nice return.
There is a huge number of investment products on the market all with varying risk and varying levels of personal involvement. The more involved you are, the more you have control over your money. It’s a good idea to get involved as soon as you are confident about financial products and your own financial management.
The terms of many investments are unlimited meaning that you can participate in the investment for as long as you see fit and terminate it should you feel the need to. You may lose on the projected return if you leave the investment early, as projects are based on years at a time.6 steps to saving money right now
So to summarise
- Saving is offered by banks
- Investing is available in a variety of financial products
- Saving is short term and fixed
- Investing requires a much longer term and is unlimited
- Saving is low risk
- Investing comes with higher risk