Because of the world economic status today and the past blows of the recession, many of us have become aware of how important it is to not just save for the rainy day, but to also make our savings grow so that we won’t have to worry too much when the time comes that our income is no longer sufficient to sustain our cost of living and our leisurely activities.
For the more financially literate, saving and investing money are powerful tools to help a person attain financial freedom. To define the terms, saving entails putting the money in the bank for safekeeping, high liquidity, and minimal growth, while investing money is using your money to buy company shares or participating in mutual funds ventures in order for your money to grow at a faster rate while taking risks into consideration. To make it clearer, saving is the choice for funds safety, while investing is for wealth growth.
In the past, only well-to-do individuals and firms participate in investment because of its high principal and lower liquidity. These were the people who don’t really need the money in the near future, so they use it to fund companies, loans and purchase shares in order to yield more wealth with little physical effort in the long term. But for those that don’t have the luxury of having a spare of tens of thousands of dollars, they would just have to stick with their savings account and time deposits.
However, many financial firms now understand the need for private individuals to be more involved in the financial market, and they have devised ways to ensure both the growth and the security of the private individual’s funds. There are also programs, such as Money Market Funds that offer almost the same ease of access to your money, or liquidity, as most banks. Thus, the presence of these types of financial programs pretty much gives investing an advantage over keeping a regular savings account.
The risk in investing your hard earned money could also be easily leveled out by arming oneself with vital economic knowledge. Knowing and keeping track of your investments will help you decide whether you should increase your risk appetite and invest more money to yield better results, or to take your money out to avoid incurring losses.
When you come to think of it, just by comparing the interest rate between a savings account and an investment account, the former will only give you a yield of 0.1% to 1.7%, while the latter can yield anywhere from 1%-3% for the lower risk option (Money Market Funds). This alone gives us an overview of how much potential our money has if we entrust them in the right hands.