Should I Save or Invest?

Save or invest
If you are not sure whether to save or invest, then maybe you need to do both. Everything depends on how old you are, what your short and long-term goals are, what financial situation you are in. Also, to understand whether to save or invest, learn the difference between these two things first.

Saving money means putting aside some to gather a certain amount. Usually, a particular short-term goal makes people save money. Your goal can be saving to buy a car, or to pay medical bills when something unexpected happens. Often, saving money means putting it in a savings account in a bank.
Investing is again taking some money but with the goal of growing it. Often, investing money means purchasing property or shares that can be sold at higher prices later on.

How much to save?

In fact, everyone should have an emergency fund. This can include as much money as needed for a few months (including rent, food, and stuff like that). Larger emergency funds include 5-9 months of expenses.
As soon as you have your emergency fund, you can start adding 5%-15% of your monthly earnings to it. Of course, depending on your saving goals, you can put aside as much of your earnings as you want. For example, you might save money to then invest it somewhere, or to buy a house, or to travel somewhere.

When to invest?

Here again, goals must be your priority. Think what your short-term and long-term goals are. Usually, people invest for their long-term goals such as the retirement, children’s education, children’s weddings etc. For example, if you are in your thirties, you might already start thinking about retirement. Although usually, retirees spend less money as they age, they still need some. 
However, note that if you are still in major debt, investing should not be your priority. Regardless of whether it is a debt for education or medical bills, you still need to pay it off. Saving money to be able to pay your debts can be the right choice here. Still, if you have only a minor debt, you can afford to save money for other things as well.

Savings accounts vs. investment accounts

Having a savings account can be way more profitable than an investment account. The reason is that you will be penalized for withdrawing money from an investment account. With a savings account, you can not only save money but also withdraw it painlessly. The federal law allows up to 6 withdrawals per month from a savings account. This is more than enough to get your funds back in case you have some emergency situation.

In the end: When to save and when to invest funds?

Let us now see whether to save or invest in certain life situations.
Save Invest
Collect money for emergency Get prepared for retirement
Go on a vacation Pay for children’s education
Buy a new car or a house Pay for children’s weddings
Saving money involves nearly no risk since your funds are insured by the FDIC. Investing money involves risk since you might lose your funds unexpectedly.
As you can see, the decision you will make regarding saving or investing depends mainly on your goals. Your short-term goals might require saving money, while your long-term goals investing it. Thus, in the long run, you will be both saving and investing funds throughout your life. It’s all about prioritization and balancing.  

Also published on Medium.

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