Saving and Investing
Why Are They Important?
Saving and Investing are two ways that you can money. They are important because they can get you extra money in your pocket so you can buy something that you have been wanting. There are different ways you can invest and the same goes with different saving methods. It all depends on the person and what they want to do with their money. The reason investing is so important is because you are taking a risk and given your money a chance to grow. However, there can be big risk when you are investing. If there is a big risk in the situations then there is a higher potential return too. Investing can really help you make money to pay off old bills, college tuition, or a couple car payments. Although you won't make money right away, investing is a good way to earn money.
Saving is important for multiple reasons. By saving your money, you are helping the economy grow. If you are keeping your money in a bank, then companies and individuals can take out loans. When they take out loans then they can buy more products or help produce more products. Another reason saving is important is because you can start saving now to help pay for things later. The most common form of this is college. Many parents start a savings account of some sort to build up money to pay for their children's college. After you have been working for several years you will eventually retire. Retirement is a big example of savings. For retirement to work, you have to save up money over all your years for working. So when you want to stop working, you have money you can live off of. As you can see, saving is extremely important is your future.
- When investing, you have to look at how high of risk your investment is. While there may be more potential money to make, there is a chance that you could lose money. Always know what could be lost or gained!
- To reduce risk, you should invest in many diverse industries. If one company you invest in fails, then you have other companies to balance out your loss. A mutual fund is a great idea.
- When you are saving money, save it for a reason. This way you are less likely to use it! Put it in the bank and see your money gather!
- Saving money is just as easy as not spending. A lot of times we spend money on things we don't necessarily need. Only spend your money on the essentials!
What You Should Know About Investing
Liquidity is how fast and easy that you can get your investment in cash form. Liquidity can also be how fast you can sell your investment. A example of high liquidity would be a savings account. You can get money out of there whenever you need it. An example of low liquidity would be real estate because you can't sell property extremely fast. It takes time to sell property.
Risk is the chance of losing money. When you first start out investing, you should invest in categories that have low risk. However, if you want to make more money then you are going to have to invest in something with more risk. Usually when there is more possible potential money to be made then there is a bigger risk.
Return is the money you get back form your investment. Depending on if the stock price goes up or down effects how much money you make in return. You have to know what to invest in and how much of your money to invest to get a lot of money in return for your investment.