Saving and investing money may not seem to have much in common, but there is one mutual reason why you may think between these two options – they can both bring you the additional amount of money and make you feel secure about the future. If you happen to have a certain amount of money you have inherited, earned or won, you may think between investing it or saving it. Both approaches have they advantages and disadvantages, and in this article we aill deal with them.
Saving the money is generally used when you do not need it for a specific purpose just yet, but you want to save it for a rainy day, or for some specific situation in the future, such as buying a house or paying for college. It is a good option because when you save money in a savings account, you can accrue the interest over the years, and when you need the money, the sum you get will be larger than the sum you have initially had. However, the interests are not usually too high, so the amount you will end up earning may not be very significant.
Still, it depends on the bank and the type of the savings account you choose, and there are plenty of options to choose from. The money you save in a savings account is the fixed amount, and it is secured against unoredictable circumstances such as the hacked account. However, the disadvantage of the fixed sum is that, once you spend it, that is it.
Investing includes anything you pay with your money which can bring you a profit later: starting a small business, investing in stocks, buying antiques and selling them later etc. If the investment is done right, it can be a great way of turning your initial sum of money into an even larger sum after a while, which can bring you financial security, as well as the opportunities for new investments. However, this approach comes with many risks. Unlike saving the money in a bank account, where you know that your money is secure and it is always there, the level of security drops with investment the money.
Imagine the scenario where you decide to invest the money you have into a small business, and after a while your business fails. It would be a huge financial loss, and the money you have invested would not be possible to get back. Also, it can be a lot of stress managing the personal business, no matter how successful it is, and it is especially frustrating if it turns out not to be successful.
Since there are pros and cons to both investing and saving, you should think well about your possibilities and about the purpose for which you want to use the money. After all, you can save it at first, and if you get an investment idea you think will work well, you can always take the portion of money from the savings accounts and invest it.