Posted on Friday 07 May 2021
Do you want to start building wealth or saving for retirement? Your savings account isn’t doing you any good when it comes to reaching your long-term financial goals! With average interest rates between 0.04% to 0.06%, savings accounts just aren’t designed for high returns.
If you’re comfortable with a little bit of risk, investing is the best way to see real returns on your money. Especially during the pandemic. Of course, 2020 brought unpredictable swings to investments – but financial experts are optimistic about 2021 and beyond. Now is a great opportunity to stop focusing so much on saving and learn how to invest.
Ready to take the next step from saving to earning? See below for the key differences between investing and saving, and how you can start investing today.
We have a feeling you'll be pleasantly surprised.
Investing and saving can feel pretty similar. After all, whether you’re investing money or you’re putting it away in a savings account, you’re still putting money aside. So what’s the big difference between the two? It's like working at an office vs working from home. You're still working right? We'll . . . let's take a deeper dive . . .
Saving is setting money aside in a safe – but very accessible – place, where you won’t be tempted to spend it immediately. Because savings accounts don’t typically have high returns, saving doesn’t come with a goal of getting more money.
Instead, it’s really just a matter of making sure that you have money on hand to meet a goal. For example, you might want to set money aside for an emergency fund, buy a new car, or even go on vacation.
Where does investing fit in? Simply put, investing is putting money into assets that have a reasonable expectation to generate more money over time.
Don’t make the mistake of forgetting that “over time” is a key distinction! For investments to be successful, funds should be left to grow, not withdrawn when you need a little extra cash. Also make sure you take the necessary steps to secure your personal information, etc. Especially in this digital age.
Investing is what brings wealth – but investing is also risky. That means you will have to get comfortable with fluctuation and volatility. You could certainly lose money before you start to make it, but with the right investments, the sky's the limit as to how your money will grow.
Investing is becoming more accessible than ever. Today, anyone can open up an investment account or a trading account right from the comfort of their own home! And that means that anyone has the ability to start boosting their finances and seeing real returns. Here are some ideas to get you started.
Your money will be invested in stocks, bonds, real estate, and more. Most will allow you to choose between making contributions on a set schedule or whenever you have extra cash laying around (just make sure you stay within the annual limits).
Setting up an account is super easy, and many of the best robo-advisors also offer guidance and education on how to match your investments to your financial goals. Even better, using a robo-advisor is very affordable, with minimal fees and smaller minimum deposit requirements.
The downside to using a robo-advisor is that you won’t always get to choose where your money goes. Your portfolio will be determined by how comfortable you are with risk, but you won’t get to choose specific stocks, bonds, or mutual funds to invest in.
Still, robo-advisors are affordable, accessible, and compared to savings accounts, they are a much better option for long-term growth.
Acorns will automatically invest your spare change from purchases that you make on linked debit or credit cards. Stash lets you take any dollar amount and apply it to companies, bonds, and industries that you are passionate about.
Both of these investing apps give you more control over where you are investing your money – and how much you are investing – which make them great options for beginners. But don’t forget that investing more money is always going to bring higher returns, so you probably won’t see life-changing results from micro-investments.
It’s easy to see why investing is much more lucrative than saving – but that doesn’t mean that you can throw your savings account to the wayside. Everyone needs to have a solid set of savings habits, no matter how successful they are at investing.
Before you start growing your investments, you’ll want to make sure you have a good foundation of savings to build from. Here are some of the best ways to get your personal finances in order:
An emergency fund is designed to cover unexpected expenses, such as an urgent home or car repair, or even temporary loss of income. Most experts recommend keeping at least three months’ worth of living expenses in a separate savings account.
While it might not gain a ton of interest, the benefit here is that your emergency fund is easily accessible and immediately available – and that can make a huge difference when times are tough.
It may sound old-fashioned, but having a monthly budget can give you a wide-open window into your finances. For budgeting beginners, the 50/20/30 rule is a good place to start. Here’s how it works for each paycheque:
If the 50/20/30 rule doesn’t feel like a good fit, try the Japanese method of kakeibo on for size! No matter what you choose, budgeting can help you get a better understanding of how much you can spend and how much you can save. When done correctly, it can also free up more money for your investments (which is a huge win for your financial future).
No matter what your financial goals may be, financial success often simply comes down to how you set aside your money. Although contributing to a savings account is important, don’t make the mistake of stopping there. Give your money a chance to grow and turn into wealth by investing!
Investing is a very deep game. So the more you learn about it, the better you get. Also there are several different investment vehicles that you can try. Stocks, real estate, commodities, etc.
The list goes on for miles. At the end of the day, you just have to get really good with one and study it at a very deep level. Of course some people just win right off the bat. If you happen to be one of these people then great. However, can you imagine how good you would be if you understood the technical side of things?