Financially Fit & Fabulous – Should You Save or Invest?
FINANCIALLY-focused women want to feel confident that they are making the right choices when it comes to planning for their future. One of the areas of uncertainty for many women is whether to commit more money into regular savings or to be more aggressive with investments which gives the promise of faster growth.
IF YOU WANT TO BUILD YOUR WEALTH, IS IT BETTER TO SAVE OR INVEST?
Although the words are often used alternately, saving and investing are not the same thing. While both activities involve diverting some of your income away from spending, your objectives for and outcomes from saving and investing are different.
BUILD AN EMERGENCY FUND
One of the main reasons for saving is to amass 3 – 6 months’ living expenses in an account that can support you in the event of contingencies such as illness, job loss or natural disasters. This emergency fund will help you to create a solid base on which to build your wealth. We have seen the need for this in the recent pandemic with job losses and reduced income.
BE DISCIPLINED WITH MONEY
Regular saving is important to get the discipline you need to be successful with money. When you are willing to sacrifice more pleasurable uses for your money to save for the future, you are forming the right mindset to build sustainable wealth. Building the habit of putting aside funds steadily will help you to get ready for bigger investments in the future.
CREATE AN OPPORTUNITY FUND
You should also save to accumulate funds that are not needed for emergency purposes. With a lump sum at your disposal, you can take advantage of good opportunities when they arise, such as making a deposit on a property or investing in stocks.
ACHIEVE BETTER RETURNS
After cultivating the habit of saving, it becomes easier for you to develop the attributes of a savvy investor. To be successful with investing, you need to learn how to actively put your money to work, so that you can generate higher returns than savings accounts can provide.
ATTAIN GOALS FASTER
Unlike saving, investing comes with the possibility that you could lose some of your money or get an unexpected outcome. However, you are willing to take on more risks to invest because you want to generate more money so that you can accomplish your goals faster. Be sure to talk with a licensed professional about your goals, time horizon, and risk tolerance.
GENERATE PASSIVE INCOME
Another important reason for investing is to build assets that can provide steady income in the future. Making investments over time in bonds, dividend-paying stocks and real estate can help you to generate repeat income without the continued injection of your own funds. You could even build enough funds to start a small business based on your passion or talents.
So, is it better for you to save or invest? Well, the truth is that you need to do both! Consistent saving gives you a solid financial foundation and options.
Meanwhile, smart investing helps to boost your net worth. They are both critical activities if you wish to build long-lasting wealth.
Sherene Todd is a licensed investment advisor from Scotia Investments Jamaica Ltd.
