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Saving and investing are important parts of a sound personal finance plan. Whereas saving provides a safety net for unexpected expenses, investing is a strategy for building wealth.
Whether you’ve been working on your personal finance for years or you’re just getting started, it could sometimes be difficult to know when you should be saving and when you should be investing.
Investing money offers higher returns than savings and can help you build wealth over time, however, it comes with its own risks. Investing gives your money the potential to grow faster than it could in a savings account. To grow your wealth, you’ll need to assess your risk tolerance. Because you’ll be exposed to more risk than you may be comfortable with in the process of investing. Therefore, in order to preserve your money’s purchasing power, you’ll need an investment strategy that strikes a balance between moderate growth and risk management.
On the other hand, saving also allows you to reach your goal on time as long as you save the proper amount daily, weekly, monthly or however you choose.
As the popular money-saving mantras goes: “A penny saved is a penny earned”.
However, it is wise for everyone to have an emergency savings fund for protection especially during challenging times. Financial advisors advice having at least six months of living expenses in an emergency fund. Once you have an emergency fund in place, you should invest enough money to reach your growth goals.
It is ultimately up to you to decide whether saving or investing is the better choice for you to reach your financial goals. Either ways, your financial plans should often include both saving and investing your money as a strategy to reach your financial goals.
Cheers to Financial Freedom!!
