There’s a big difference between saving and investing.
While both are important for your financial health, it’s important to know the difference and choose wisely!
Saving is when you put away money to use in the future, but usually when you aren’t focused on getting a big return on that money. Investing is when you put away money for a longer period of time in the hopes that it will grow.
Really, the difference comes down to a few things: What will this money be used for, and are you willing to risk losing any of it?
Purpose: If you need to pay for something relatively soon, like a new set of tires or an upcoming vacation, you’ll probably want to simply save that money somewhere that you can access it quickly and easily. A savings account (preferably one that can earn interest) would be perfect for those types of expenses.
However, if you’re putting away money for retirement or an expense that’s months or years away, such as a new car or college education, you may want to invest. Often, investments are for longer-term needs.
Risk: With something simple like a savings account, you aren’t going to lose that money. However, the growth of that money is going to be limited. Typically, savings accounts earn returns of anywhere from 1 to 5% per year.
If you want your money to grow over time —and you’re willing to handle some risk —investing is what you may want to do. Investments (like stocks, bonds, or some real estate) can earn higher returns over time. Looking back over history, the stock market gives returns of 7 to 10% per year, but remember that some years (like this year!) your returns might be lower.
You probably have a lot of goals and a lot of different needs for money. You may need those new tires in the next year, but you also may need to be putting money away for retirement. How do you figure out what to do and how to balance it?
Our financial advisor, Denise Rich, can help you figure out when saving is good, when investing is better and help you plan for your goals. Denise is part of our CommonWealth One Financial Network, and she’ll be leading a webinar on Wednesday, June 25 at 3:00 p.m. (ET). It’s free to join and you’ll learn about saving, investing for retirement and much more. Click here to register to join us (or view the recording if the event has already past).
We hope to see you soon!
