People often use Saving and Investing interchangeably, but the terms mean different things; impacting our lives in different ways.
For many, the decision to save or invest can be confusing but how do you know when to start either? That decision is based on one’s ability to take on risks, their financial goals and financial situation.
A savings account carries minimal risk. You put money aside, usually in the form of cash, to be withdrawn at a later date. An investment is not cash. Investment involves using cash to purchase assets; whether it’s equities, bond or mutual funds, which have the potential to generate significant returns with the possibility of making you wealthy over time.
This can be achieved through income generated from the investment or through gains made once the investment appreciates in value. However, the risk in investment is far higher than a savings account.
Saving money should always be the foundation on which you build your financial tower. Emergency funds and school fees should be done through saving.
On the other hand, long-term goals such as retirement, planning a college fund, starting a business or even to leave a financial legacy to a family member(s), should be done through investing.
Defining short term and long term regarding the number of years for each is not set in stone or defined. However, we would like to think that short-term is under five years and long-term is over five years.
Though saving and investing may have their differences, they go hand in hand. Never forget that the money used for both saving and investing is out of the league of expenditures. Additionally, whether short term or long term, both are meant for the benefit of the future and both takes discipline.
If you want to start investing with SSL but don’t have the time to monitor the market or to conduct the trades yourself then you can choose one of SSL’s managed Financial Planning products. We offer a variety of products for every type of investor and if you are interested in managing online trades yourself and having complete control over your investment portfolio then you can try SSL’s Brokerage account.