There are a lot of ways to handle your money. Gaining financial information, literacy, and knowledge also leads to you being able to profit better and earn more money in general. This is important because almost everything in this world can be bought and traded for money. Although it’s not necessarily good to obsess about it, having a good grasp on monetary systems and how to handle them will lead you to live a life that isn’t as financially constricted.
Money may not buy happiness, but the freedom from constantly worrying about having to pay your bills and other dues sure is comforting. With that, there are different ways to go about gaining more money: taking advantage of a bank and its checking account bonus, opening a business, and many more. Today, we’ll focus on two key things that we suggest you should always do: investing and saving.
Depending on the situation, investing and saving have its pros and cons. It’s in the balance of the two that you will find the best spot for earning and having more money, so it’s important to distinguish the two. Other than that, saving and investing are activities that have a very little barrier to entry, so almost everyone could also be in one.
Saving and investing: what’s the difference?
Both things entail that you’d set aside money for the future. Whether this money comes from your salary, money earned from a business, or anything, the concept of setting aside funds could be widely interchanged between saving and investing. You’d gain back more than you’ve put in generally, but there are a lot of nuances between the two.
- Saving – The act of putting money aside, usually in a bank or a cooperative, to be used on a later date is considered as saving. Why you’d want to put it in a bank or other financial institution is so that your money would grow. With inflation rates and other economic forces, simply keeping your money stashed away in a piggy bank would actually have you lose some of it. A savings account within a bank or cooperative allows your money to grow via interest rates. How banks get money for interest rates is through allowing other bank members to loan your money in the meantime. When these people pay back the money, they pay it with interest.
- Investing – Investing is putting money into an asset with the hopes of having the values of such assets grow over time. This means that you’re essentially buying shares of a certain company or real estate and that the value of those shares would increase. This can come in many forms: real estate or houses, public companies, trust funds, and mutual funds. Investing has a level of risk factors that savings might not have. However, these risk factors could be variably changed, depending on your risk-taking preferences. There may be companies that could yield exponential returns but also have high chances of tanking and never taking off in the first place.
Which is better for you?
Both have its benefits and costs. It’s up to your financial status, the flavor of risk, and even your personality to choose whether you’d want to invest or save. Generally, there are some things to consider whenever you’re choosing between the two. For time-bounded things like acquiring funds for a car or a house, saving is the better route. Investing may take longer periods of time, so you can’t really access your money as quickly. Saving, on the other hand, will have you set a specific amount of time that you can trust will be given back to you. This also runs true for how liquid your money is. Investing generally is harder to make your money invested move, as compared to savings. Emergency funds for natural disasters or unforeseen events could be better staved off with your savings.