SAVINGS Vs INVESTMENT (My entry to a contest organise by @samsuccess
It is another edition of our community contest. All thanks to the organizer for bringing 8n a Topic like this.
We all know that to get suçcessful in life someone must cultivate the habit of either savings or investment. In my entry today I will give insight to the two area and why I prefer savings over investment.
Savings in my own knowledge is setting aside some percentage of one's income for future need or future usage. While
Investment is putting some amount of money into a business, scheme or organisatoon with the primary aim of getting some profit or increase.
It might be difficult to know when you should save and when you should invest, whether you've been working on your money for years or are just getting started.
Saving is the safer route because the dollar amount in your bank account won’t normally diminish unless you withdraw it, but interest rates on savings accounts don’t allow your money to increase very quickly. Sadly, interest rates often fall below inflation rates. This means that your savings can be lost over time.
It is tempting to invest in higher yields and inflation. Sadly, your investment's value will not always increase. In other situations, investments can be totally ineffective.
So, when should you stick to the safest road and save or risk higher profits and invest?
This is what you need to know. You need to
ADVANTAGES OF SAVINGS
There's a lot to save instead of to invest. First, as long as you do not withdraw, you will not reduce the amount you save in your savings account over time. This is vital, because certain objectives must be met irrespective of whether investment prices are up or down.
Even saving instead of investing will enable you to achieve your aim on schedule while saving the correct amount every month. Take the total savings and split it by the number of months until you reach your goal to discover the savings you need every month.
DISADVANTAGES OF SAVINGS
However, saving has disadvantages. The money you save will diminish every year because of inflation. This interest may partly compensate the negative impact of inflation if you earn interest. Unfortunately, interest rates seldom match the inflation rate.
It also requires you, if you obtain larger returns, to spend more money every month than you would have. You have to make up for the 7 percent discrepancy if you only receive 1 percent interest on a savings account but may earn 8 percent return investment by placing additional money into your savings account to achieve your target at the same time.
ADVANTAGES OF INVESTMENT
It can also be helpful to invest. Investment allows your money to increase more quickly than it can in an account of saves.
If your returns are compounded for a long time till you accomplish your target. This means basically that your investment income will also make money over time in addition to a larger return on investments.
You will not have to invest as much every month to save every month to accomplish your objective, as bigger returns are beneficial.
DISADVANTAGES OF INVESTMENT
However, investing is not always good. Investment prices can go down just before you need the money to keep you financially binding.
If that happens, either you have to select for a cost-effective choice, delay your target until you are able to save more money, or wait your target until you have increased your investment value.
WHY I PREFER SAVINGS
Considering the points above. I prefer savings ahead of investment because it gives you in possession of your money and make it available for use in case of emergency,
It is not possible to lose your savings as investment can be totally lost due to many reasons or factors.