The use of our money can be generally divided into 3 parts: spending, expenses, and savings. Spending entails the use of money to meet our needs and wants. What we spend money on would normally include house rent, house maintenance, purchase of food, transportation (public transport fees or maintaining our cars), food, clothing as well as support to family, friends and charity. What people sometimes wonder is the difference between savings and investments. Savings are the money we keep aside in a bank or other locations where we can easily access them. While we are wise and disciplined enough to know that we should not spend it on general expenses, we know it can come in handy in the event of an emergency. Investments, on the other hand, are money that we have not spent on general expenses, but rather on things that can bring us more money in the long run. This article will now discuss why you should save and invest at the same time.
Savings are different from investments and both are important
One of the major reasons why you should save and invest at the same time is that there are differences between savings and investment with both of them being very important. People who do not save will often find themselves in a situation where they urgently need money to sort out an urgent issue.
When such situations arise, they end up asking from friends and other people who might not be able to help them then. In some cases, they might not be able to meet up what they want to use the money for, and it could sometimes be very expensive. Some end up getting money from a payday loan and other quick loan platforms. However, they will be expected to pay back the loans with interest.
In some cases, this ends up worsening issues for them as they will constantly have to revert to taking more loans before the next payday since they already used a chunk of their current pay to sort out problems. Those that have savings will often not find themselves in this situation. They will be able to pull out of their savings to sort the problem and then they would be fine. Those that have only investments, however, will also suffer a similar fate. This is considering in most cases, they will not be able to access the funds in their investment, since they are mostly long term. The implication is that they will still find their selves in situations similar to the instance above.
A major reason why investments are encouraged as opposed to just only savings is that your investments are normally expected to be put in things that will be more profitable than how much inflation will increase. This is as opposed to your savings that will not increase as much as inflation and instead, the money you are saving might be losing value. With investments, you will have some part of your money gaining money for you such that the investments could make you very rich in the next few years, depending on how viable your investments are. Your savings won’t be able to help you achieve help.
Savings are majorly viable in the short and run. While there investments that could also be viable in the short run, most investments are often geared for the future. Some investments are viable in both the short term and long term. If you have been wondering what about cryptocurrency and where do they stand, then you should know that cryptocurrency falls under-investment. However, it is a type of investment that could be accessed in the short term and long term. However, if you want to get the best out of cryptocurrency, you should plan for the long term. Those who invested in cryptocurrency in 2013 can boast of their money increasing in value up to over 10,000% of their investment in 2020. While you might not expect that huge results by 2027 if you invest in 2020, you could expect similar results in another 30 years.
Best places to save your money
Traditional banks mostly give very low interests on their loan. Hence, you might want to save your money in other financial institutions that promise a higher percentage of profits and that still allow you to access your money anytime you want to. However, it will be important to cross-check that the financial company is reputable before investing your money therein. You do not want a situation where the company will disappear and you will lose your money.
Best places to invest
There are investment platforms where you can save money include peer to peer investment platforms. You can also invest in real estate or start a viable business. You could also partner with a trustworthy friend or family member who have a good business idea, the time to run the business but do not have the capital. Generally, investments should be such that you can continue your normal work while other people will be working to raise more money with your investment capital, out of which you get a part of the profit. Cryptocurrency and forex trading are also great investment options for those who have the knowledge and are not in a hurry to make so much money.