Right Strategy To Hit Your Financial Goal <> Saving vs. Investing
In the pursuit of any financial goal, it’s smart to stop and consider whether to save or invest the money you set aside for it.
Saving and investing are often lumped together as the sole alternatives to spending money, but each strategy has its own advantages and disadvantages.
You should save to preserve your money and invest to grow it. Depending on your specific goals and when you plan to reach them, you may choose to do both. “When deciding whether to save or invest your money, it is essential to prioritize determining when you will need it,
" according to Maizes. “For shorter-term goals, it is best to ensure your money is easily accessible and not likely to fluctuate in value significantly.”
Comparison between saving and investing
| Saving | Investing |
|---|---|
| Minimal risk: saving account balance has no risk of declining | Higher risk: You could lose money or get returns there is no guarantee |
| Predictable returns: Yield on savings are not guaranteed except if there is a decrease in interest rate. | Fluctuating returns: Investing offers the potential for high returns. |
| Immediate access: Sending funds to your saving account is very easy | Barriers to Access: Investment account may charge a penalty or tax even both on withdrawing the investment gain early |
| Short-Term Need: A saving account is an ideal spot for an emergency fund or funds you will need for a short period of time | Long-Time Goal: Investing can help grow money over the long term making it a strong option for funding expensive future goals. |
When Is The Best Time To Save
Saving money is best when you have immediate or near-term expenses that your monthly income wouldn’t cover on top of your usual spending. It can take time to build up savings for dedicated expenses, but doing so means you avoid taking on high-interest debt because there’s a guaranteed pot of cash to pull from. When you save your money, you know exactly what your return will be.
When Is It Important To Invest
For financial goals that are at least three to five years away, the benefits of investing generally outweigh the risks.
"When setting aside money for a long-term goal, there is a greater likelihood that if an investment's value decreases, there is still time for it to recover," Maizes says
Situations when it makes sense to invest:
To build generational wealth: If one of your goals is to pass assets on to the next generation i.e. your kids or grandkids, investing can help you grow and ultimately preserve the value of your wealth over many years.
To generate income: Investing in bonds, and dividend-paying stocks, can produce a recurring income stream while also growing your principal investment.
You have excess cash: If your savings accounts are flush and your income covers your current expenses, consider putting some of the extra cash to work so that your purchasing power isn’t eroded by inflation.
Why not start planning for December expenses so you won't be caught unaware🤣 which strategy suits your plan drop it in the comment section let's discuss.
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Thank you for sharing. Great thoughts well laid out here. I'm of the opinion to cultivate both habits pari pasu
Thanks for stopping by.😘
You're welcome darling 😘
I liked the post as there it's good information in there. I would disagree a little though.
You write about choosing between saving and investing.
Savings IS investing. My short term savings is an investment paying a guaranteed 2.5%. My longer term savings are in GIC/ term deposits paying 5.25%. My longer term income investments are typical preferred shares paying regular income at an average 6.5%. My stock and mutual funds are long term with unknown return but hoping for 8% over time.
My home is an investment that provides income from rental rooms, capital gains over time
This is your view. so what will you call the funds you have somewhere for miscellaneous expenses?
My slush fund is at motusbank making 2.25% interest. It's a short term investment with a debit card attached so I can spend it at will.
My income investments are with IKBR with a Mastercard attached so I can spend the dividends at will.
My apologies if I offended, you made a great post. I just try to think of everything as an investment of varying durations. The duration determine how much risk I'm willing
My slush fund is at motusbank making 2.25% interest. It's a short term investment with a debit card attached so I can spend it at will.
My income investments are with IKBR with a Mastercard attached so I can spend the dividends at will.
My apologies if I offended, you made a great post. I just try to think of everything as an investment of varying durations. The duration determine how much risk I'm willing to take. My slush fund is a zero risk investment (savings account) but it still pays 2.5% calculated daily. Each day I don't spend is more interest made 😉
I liked the post as there it's good information in there. I would disagree a little though.
You write about choosing between saving and investing.
Savings IS investing. My short term savings is an investment paying a guaranteed 2.5%. My longer term savings are in GIC/ term deposits paying 5.25%. My longer term income investments are typical preferred shares paying regular income at an average 6.5%. My stock and mutual funds are long term with unknown return but hoping for 8% over time.
My home is an investment that provides income from rental rooms, capital gains over time but incurs expenses in upkeep and taxes-- typically 3.5% return over time.
However even little things are investments.
.... my food is an investment in health.
.... my shoes are investment in my comfort but also in my ability to walk places and save money.
... my cellphone an investment in being able to use Hive.
One every use money becomes an investment then it becomes easy easier to avoid impulse spending 😀
The trick is making every investment bring you one step further towards your goals.
...
And of course knowing what those goals are 😉
Thanks for the post
👏👏👏
I love this argumentative. you have this perspective base on your achievement and wealth acqusition. an average people won't see this angle, I wrote this base on my finianacial strategy. all the same thanks for the insight.
And it's an awesome strategy. Savings account for short term necessary goals. Investments for bigger long term goals.
I just like thinking of my short term savings as an investment too..
And seek out the best return there also. So many Canadians accept 0.1% return on their savings account and 0.0% return on their bank account while they pay$14.95/ month for the Account. Grrrrr... a rip off.
My checking account.. no fees 0.5% interest.
My saving account. No fees 2.25% interest.
Your methods are awesome and your rationale is great👍... I just think savings are investments too 😉
Sorry...I just can't seem to not be a little argumentative 😉
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Coming across this post just made me realize that i need to invest too, hehe. I think putting all eggs into one basket comes with lots of risk and it isn't a very wise idea. So if i were to chose, i would go for the both. Save and invest too.
Which would you choose yourself?
#dreemerforlife.
Thanks, dear. I will prefer to set up different investments for my future and the future of my unborn kids so I can give them a better life. and use the saving to take care of my basic necessity and do small big girl😍
😂. very wise line of thoughts. Its always best to save for the future but also in the mean time, reap small fruits of labor.
Have a lovely day hunnay,
Thanks for the very interesting read, highlighting some big differences.
#dreemerforlife beemed down from #dreemport - to this #dreemer curated post :)
Thanks for stopping by
I'd like to invest to build generational wealth. If I had something like that, it would have really helped me to achieve most of the things I want to. So I would want something of an headstart for my children.
Thanks for sharing this very educative post.
#dreemerforlife
Thanks for stopping by
I would like to think of my savings as an investment, if it's not bringing me a percentage based on what i save its definitely going to be the investment route. Thanks for sharing this awesome post.
#dreemerforlife