Most people seem not to be aware of the distinct difference between savings and investment. Sadly, some people do not even know the appropriate time to either invest or save, and worse still some others are not quite sure which one they are doing.
While both is of great importance especially for rainy days, savings provide the solution to urgent financial obligations, the desire to fulfill or satisfy a financial need for a car, college funding or anything else you will need cash for.
According to Joe Plemo, financial counsellor, investments are specifically for wealth building, and will not be needed for many years. Yes, investments do involve greater risk, but equally yield much greater returns when left long enough to survive the turbulence of the stock market.
Most people seem not to see the potential for investing with the notion that it avails excessive risk and can be quite difficult surviving especially if the stock market does not swing in your favour. This is quite true but investing allows you to potentially grow your money at a higher rate than a savings account, say Brittney Castro, creator of FinanciallyWiseWomen. com.
Experts say while saving is simply accumulating money in a safe place so it’s readily available when you need it, investing puts your money to work. Hence, if you can grow your money faster than a savings account can, you will have a lot more money for your various financial goals like retirement, education and can even have “solid cash” for your offspring to inherit.
Though, investment returns are not guaranteed and even the principal can be lost sometimes, the first step to take is by making sure you set aside enough money in a savings account to cover emergencies and short term needs. You should also ensure your high cost debts are being paid off. Saving and paying off high cost debt provide a solid financial background, while investing is the next step to securing net financial worth, say Lisa Leslie, financial blogger.
Experts say while investing in the stock market does involve more risk you can choose from less risk prone investment like, real estate, bonds, antiques, precious metals, gemstones, fine art, and even shipping containers. Other alternative investing options include commodities, venture capital and hedge funds.
The other big key to benefitting from investing is to be consistent with it. Rather than just saving your money, financial experts advise you to invest it, and a far better approach is to invest a regularly. Equally ensure you watch market trends regularly so you know the right time to benefit from a particular sector and also when to make quick decisions about your investment.
Investing in the stock market does involve more risks including the loss of your principal investment, expert’s advice says you should do your homework properly and make sure you understand the ins and outs of investing, or better still ensure you diversify your investment so you do not get tremendous loss when one sector suffers.
Overall, banks would push for a savings account because it will earn them more money; however an investment account is going to make it easy for you to save money and earn interest at the same time on the long run.