Author: Quentin Tarnau
Date of Publication: 26/05/2023
Nowadays that people face a lot of financial problems, and everyone is looking for ways to make money. However, there are two types of people: those who save and those who invest. Many claims that the more you save money, the less their value is over the years. That’s why they prefer investing their money rather than saving it. In any case, saving or investing will depend on your plans, and whether you need money available immediately or not.
Save your money and keep low risk
Saving money generally means putting your money into a low-risk savings account, where it will earn a low rate of interest. The good thing about this option is that the money is safe and easily accessible anytime. Therefore, saving is a good option for short-term goals, such as building an emergency fund. Apart from that, you might save for a down payment on a home or a large purchase you plan to make within the next few years.
Pros of saving money
- Money is easily accessible and can be used immediately.
- Low risk, so your money is less likely to decrease in value.
- Good for short-term goals
Cons of saving money
- Low returns, so your money may not keep pace with inflation.
- Opportunity cost, meaning you could be missing out on higher returns if you invested
Invest your money now or never
Investing money is buying assets or liabilities and there are several ways to invest that are more or less expensive. As in buildings with the purchase of apartments, you can also buy shares in companies, cryptocurrencies, or by buying gold. Last, the purchase of works of art can also be a way to invest.
Pros of investing money
- Potential for higher returns than saving.
- Compounding, meaning your money can grow over time.
- Good for long-term goals
Cons of investing money
- Higher risk, meaning you could lose money if the market performs poorly.
- Less accessible, meaning you may have to sell investments to access your money.
When to invest and when to save?
Some people are concerned that it is better to save than to invest and vice versa. The thing is that you need to save if you have short-term plans such as buying a car or a house. But if you have more money you can invest, in general we say that we must invest what we can lose and what we don't need.
The money you can invest depends on your income. For example, there is a rule to have money in an account to cover these expenses for 3 months before investing. Afterward, you can save between 15 and 20% of your income and invest the rest.
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