The Difference Between Investing And Saving

A key focus of my blog is Financial Literacy/Money. A key aspect of this subject area is understanding the difference Investing and Saving. Bother are very important terms which complement the other. Understanding the two can change lives. The following contributed post is entitled, The Difference Between Investing And Saving.

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Investing and saving are two fantastic options for anyone looking to be smart with their money. At a base level, they both serve the same purpose; you want to put money aside, with the aim of having more in the future.

But, some fundamental differences show both options have their own pros and cons.

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Investing is far more complex

It’s easy for anyone to open a savings account and start saving money. You don’t need much financial know-how at all, just a brief consultation with a financial advisor at your bank will give you everything you need to know. Essentially, you open an account, put as much money as you want in there, and the interest rate sees it grow year by year.

With investing, you have something far more complex. There are loads of different ways to invest, and each option also contains more choices as well. Take the stock market; you have loads of different things to invest in, from futures to options – and everything in between. Then, you have to look at things like option historical data, previous sales, current market trends, and so on. It’s so incredibly complex, making it hard for the average person to get involved. Typically, you need to take in a lot of knowledge to get to grips with stock market investing. Bear in mind, this is just one example, you also have property investment, forex – the list goes on and on. Saving is simple, but investing is definitely very complicated.

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Saving returns are restricted by interest rates

When you put money in a savings account, it will increase in value over time. This is due to interest rates, but the catch is that interest rates are usually horrible. In essence, this means you don’t get outstanding returns, and you have to keep your account open for many years before you see anything substantial.

So, saving returns are restricted by interest rates, but investment returns aren’t. Your return on investment varies depending on the market conditions. In some cases, you can earn colossal returns after just a few months – it depends on the investment. If you were to compare savings and investments with regards to their returns, then savings definitely come out second best.

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Investing carries more risk

The flip side of this is that investing carries more risks. With a savings account, you haven’t really got any risks at all. The money sits there collecting interest, and you don’t have to worry about anything.

With investing, there are so many variables. A market crash can make your investment plummet in value – or the company you’ve invested shares in could close down. If you invest in property and the property market experiences a dip, then you’re in trouble. The point is that you may get better returns, but you’re taking a bigger risk.

Ultimately, either option is an effective way of using your money. They’re both far better than reckless spending! The best way to summarize the differences is that investing is riskier, more complicated, but can grant higher rewards. Generally speaking, it’s a smart idea to try both ideas if you want to do more with your money.

Setting Your Sights And Savings On The Future

A key focus of my blog is Financial Literacy/Money. One of most basic financial intelligences is learning how to save money. While it isn’t the most flashy money habit, building a substantial savings can keep you out of trouble and open up doors that otherwise wouldn’t be open. The following contributed post is entitled, Setting Your Sights And Savings On The Future.

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When it comes to saving for the future there are the obvious things that you’re probably already thinking about, your kids’ college funds, your retirement, unemployment, and medical emergencies are the ones at the top of most people’s list, but there are others too. While you might have fall back options such as access to settlement loans, or inheritance, it’s not ideal to rely on just these. It is better to save and not to overwhelm or panic you, but some of these could make you money, so it’s worth having a look:

Home and Car Repairs
Okay, saving for repairs won’t make you money it will certainly save it in the long run as repairing things is usually cheaper than buying new. If Your fridge breaks without warning and needs to be replaced or the transmission falls out of your car, it’s good to have at least $2,000 at your disposal so you can address the situation as soon as possible. Also, home or car repairs can have a knock-on effect on other parts of your life, for example, if you can’t get to work because you can’t afford car repairs, that situation could just get worse.

Investment Properties
Rather than just saving for scenarios where you will never see the money again, here’s the bit where you can save and make money. If you have managed to clear your debts, don’t have many other expenses, and yourself in a position to save to invest, then this is a great position to be in. Saving for an investment property, in particular, can provide additional income by renting it out on a short- or long-term basis. This is usually a smart decision if you can afford it because of the positive financial implications down the road.

Entrepreneurial Endeavors
You could also be saving to become your own boss, if that’s something you aspire to be and depending on what type of business you want to pursue will dictate how much you’ll need to save. For example, an online business or consultancy which you can work from home with low overheads can be inexpensive to start up, but if you wanted to open a restaurant, then that will need some serious savings.

Luxuries
While you should definitely be saving for emergencies, medical bills, home, and car repairs, and other necessities, there comes a time when you need to treat yourself too. You don’t need to treat yourself every chance you get, but you could choose one big item to save for throughout the year. Perhaps a cruise or a new car? Whatever it is, making a conscious decision to save for it so you can enjoy some of life’s little luxuries.

Caring for Elderly Parents
It’s not a nice thing to think about, but it is inevitable that your parents will get to an age where they might need assisted living, and it’s good to be prepared financially for this. It’s becoming increasingly common now since people are living longer in general and because many older people have much less to live on these days due to the high cost of living.