Saving or Investing: How to Achieve Financial Security?

Saving or Investing: How to Achieve Financial Security?

If you have a little extra cash and don't want to spend it on your daily needs, you may have a question: save or invest this amount? This is a good question because these two options have advantages and disadvantages. Consider the main factors and make a choice depending on your purposes.

The Difference Between Saving and Investing

To decide which option suits you, you should distinguish how they work.

• Investing is using money to make it grow by buying stocks, mutual funds, bonds, real estate, cryptocurrency, and other assets. They might increase in value, which will bring you income.
• Saving is putting money aside. People generally keep it in a savings account or in their homes. In such a way, they hold back from spending cash.

When Should You Save?

If your income only allows you to pay for basic needs and you can't afford anything else, savings is the right choice. Try to save even small amounts regularly to have a sum that can cover six months of your living expenses. An emergency fund gives you access to money when needed and can help you pay for unexpected costs. With its help, you avoid using high-interest credit cards and earn interest.

Additionally, saving is suitable for short-term financial goals of up to five years. For example, it can help you buy a house, cover travel expenses, or pay for college.

When Should You Invest?

Investing is the right decision if you meet the following criteria:

• You already have an emergency fund. Before investing, ensure you have extra cash to pay for unforeseen costs. It can protect you from the loss of all your money.
• You paid off high-interest debt. Having high-interest debts can slow down your investing, so return your expensive debts before you start investing.

Unlike saving money, investing suits long-term financial goals. For example, you can invest to get cash for your retirement. Investing leads to a return of a higher amount than a savings account. However, consider that it doesn’t guarantee income and always involves the risk of losing some or all invested funds.

Compare Saving and Investing

If you still can't decide what to choose: saving or investin, here you can see the main differences between these two options.

Saving	Investing
Short-term goals	Long-term goals
Always available access to cash	Waiting for access to money takes longer
Minimal risk	Always involves risk
Low-interest	Potential for a higher return