Although many people think saving and investing are very similar to one another, there are some key differences.
By being aware of those differences you may change your mind when deciding which action to take.
We listed some pros and cons of both saving and investing to help you to weigh which is the better solution for you.
Similarities and differences between saving and investing
The thing that connects the two is that they are both strategies to accumulate money! Saving or investing both imply putting your money aside for potential future needs.
They can both protect you from debt. However, if you find yourself in that situation, be active in the process and claim Payment protection insurance if needed.
The difference between the two is the type of assets used in the account.
Another one is that if you want to be able to use the cash quickly, save (but it can also be done for some long-term future plans).
If you don’t want to play it safe and your desire is achieving a higher return – invest!
Where to go?
Savers – go to a bank or a credit union and open a saving account. When opening a saving account, look for the APY (highest annual percentage yield) to maximize your earnings.
Investors – open an account with an independent broker, which includes mutual funds, bonds, stocks and exchange-traded funds. Also, keep in mind when investing that you should invest only the money you won’t be needing any time soon.
You should keep your funds in the investment for at least 3 to 5 years minimum.
Are there some risks?
While investing, you should always think twice before doing something. Saving is safe with the minimum amount of risk – it is very easy to do and the chance of losing money is equal to zero.
You are always familiar upfront with how much you will earn in your balance.
On the other hand, investing is always unpredictable and you have to be aware of the risk of potentially losing everything, but also of earning a lot more!
When talking about risk, the thing that needs to be mentioned is the price of saving and investing. Saving is not expensive, since opening an account is free.
But, you have to keep in mind some unpredictable factors such as inflation. Saving doesn’t protect you from it, while investing potentially can save you (if you think in a long-term period).
How should I decide whether I should save or invest?
This decision should be based on your wishes and needs.
If you’re looking for earning money and taking risks that can possibly have very good or very bad consequences, you should invest.
If you are thinking about putting some money aside just in case you might need it someday and you want to be able to use your money whenever you need it, you should save.
This decision is not always easy. Thinking it thoroughly, make the best decision for yourself. It can be a lot easier than you think – contact Optimal Solicitors in Manchester, they know what to do!
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