Saving v Investing

Dom Soreo

What is saving and Investing?

Saving is a portion of current income that isn't being spent on consumption.

Investing is a purchase of assets in hoping of making a higher income in the future

The purpose of Saving and Investing

Savings help build financial stability and can be used for emergencies, and used for short-term goals if needed.


Investing is used to build up ones net worth and used for longterm goals and for retirement.

Advantages and Disadvantages of Savings and Investing

Savings

  • Savings are very liquid, meaning that it can turned into cash quickly.
  • Have at least 6-12 months worth of expenses saved if needed. (if saved you won't need loans)
  • Use the money to pay for short-term goals
  • When saving you have opportunity costs, along with trade-offs
  • Won't stress about not having any money saved when needed
  • Can be accessed quickly due to how liquid it is.



Investing

  • Taking the risk can have a higher return at the end
  • Can reach longterm goals much faster than saving
  • Having that stock (or share) can make you more money in the end
  • Improves your spending habits
  • Having a higher net worth can make it easier to get a loan because you are valued more

A few examples

Savings

  • Commercial Banks/Savings accounts
  • Certificate of deposit
  • Money Market Accounts
  • Mutual Funds


Investing

  • Bonds
  • Stocks
  • Index funds
  • Real Estate