Savings Vs Investing? Which Is Right For You?

This guide will help you learn the basics of both so you can decide which one is best for you.

Taking a step back is often the best way to make a wise choice. Forget about the details for the present time and just think about what you want your money to do for you. In a few minutes, it should be much easier to decide whether to save or invest.

What Is Saving?

When you save, you put some of your money away for the future. You can put money into your savings all at once or on a regular basis. And if you use an easy-access account, you can get your money back at any time, along with the interest you've earned. And if you use an easy-access account, you can get your money back at any time, along with the interest you've earned.

Aside from being easy to get to, one of the best things about saving is that it's safe. Is saving risk-free? No, not really. Since interest rates have been low for years, you won't get much back on your money. It might not keep up with inflation. So, the money in your savings account isn't heading anywhere, but it's getting harder and harder to buy things with it over time. In other words, you can buy less with it.

What Is Investing?

Investing is another way to put money aside for the future. There are many ways to invest, and most of them come with some kind of cost or fee. Shares and funds are probably the most well-known types of investments. With shares, you buy a small piece of a single company. With funds, you buy a ready-made group of investments that are managed for you by a professional.

When you invest, you put your money into something you think will be worth more in the future for example, you might invest in Commodities or other stocks. Here, you face a different type of risk: exposure to the markets. This means that the value of your investment can and will change, so you could get back less than you put in. Your expected returns can also change, and you can't always count on them.

Because of this, you should try to invest for at least 5 years. If the value of your investment goes down, a longer time frame gives it more time to recover. By figuring out when you'll need your cash, you can manage the risk you're taking.

Why risk anything? First of all, not all investment risks are the same. And if you take calculated risks, you might be able to make more money than if you just put your money in a savings account. Is it worth taking a risk to invest?

Which One Should You Choose?

It's more about finding the right combination for you. There are, of course, many different needs and goals in life. So it's likely that you want to put your money toward more than one goal.

You should figure out how much you can save each month as a good place to start. When you have a number in mind, you can think about how to split it up to make sure you have cash for various parts of your life. How you do that will depend on your age and what's most important to you.

It's smart to put your money in different pots: