Investing or Saving: What To Choose?

Investing or Saving: What To Choose?

At the end, is you who decide whether saving or investing is the better choice to fulfill your financial goals. But, for some goals, one is better than the other.

It doesn’t matter if you’ve been working on your finances for years or you’re just starting, it can be difficult to know when you should be saving and when you should be investing.

Saving can be the safer route, because your money won’t typically decrease, but interest rates on savings accounts don’t allow your money to grow very quickly. Unfortunately, interest rates are often lower than the rate of inflation. This means your savings could lose purchasing power over time.

That´s the reason why it’s tempting to want to invest to receive higher returns and beat inflation. Unfortunately, the value of your investments won’t always go up, and that’s the risk you have to consider.

The question is, how do you know when you should stick to the safer route or risk more to earn bigger returns, here are some pros and cons that will help you choose the best option for you.

On the one hand, saving allows you to reach your goal on time if you save the proper amount each month. You just have to calculate the total you need to save and divide it by the number of months until you need to reach your goal to find the amount you need to save each month. But it also has downsides, due to inflation, the money you save will decrease in value each year. If you earn interest, that interest may partially offset the negative effect of inflation. 

On the other hand, investing gives your money the potential to grow faster than it could in a savings account. If you are not in a rush to fulfill your goal, your returns will multiply, which means that your investment earnings will also earn money over time.

The benefit of higher returns is you won’t have to invest as much each month as you would need to save each month to reach your goal, but it isn’t always a good thing, because prices could go down right before you need the money, that’s why you should study your investment options and choose the most reliable one. 

Knowing this, you should set your goals and choose what is better for you.If you’re thinking on investing, contact us, we have special plans according to your needs.