When people save money, part of the reason that they do so is so that they have funds available for a “rainy day” in the event that they really need them. Nobody likes living paycheck to paycheck and there’s a certain level of comfort that goes along with knowing you’ve got an emergency fund available nearby. A large part of the reason, however, is that your money is supposed to slowly make even more money for you over time by way of interest and other benefits. When it comes to allowing your money to naturally grow over time, the two trains of thought that you’ll want to research involves investing versus saving with traditional means.
Investments and traditional saving have advantages and disadvantages over the other. One of the major benefits of placing your money into a traditional savings account involves the fact that you still have relatively easy access to it in the event that you need it. If you need to withdraw $1,000 from your savings account in case of an emergency, you can do so just by going down to the bank and making a withdrawal. For investments to work properly, you need to be prepared to allow your money to sit untouched for a period of years or more. This means that you might not have access to that emergency fund in the event that you experience trying times.
Situations where you should consider making an investment require you to keep two key things in mind. For starters, you need to have money available for the purposes of investing that are in addition to any emergency funds that you may need. Don’t empty out your savings account just to make an investment. You should also be able to leave that money in the investment for a long period of time. Situations that meet those criteria are the ones where you should seriously consider going with an investment opportunity over a traditional savings account for your hard earned money.
If you’re not in a position where you have a great deal of additional money sitting around on top of your savings account that you can use for investment banking, you can still enjoy all the benefits of both saving and investments so long as you’re properly splitting your income.
Financial experts at CNN Money have stated that as a general rule of thumb, between 10 to 15 percent of the money that you make starting in your 20s should be going towards investment opportunities for the purposes of making sure that you’re taken care of when you retire. 10 to 15 percent of your income may not seem like much at the time, but if you start early enough and save consistently, you might be surprised by just how much money you have over as little as ten years. You can increase or decrease your investment percentage as your comfort level changes and place the rest into your savings account as needed.
If you have any questions about savings account and investment opportunities, consult with your bank and a financial advisor to determine which mix works the best for you.
This blog post is the opinion of Belmont Savings Bank and is not to be taken as financial or investment advice. For personal financial advice, please consult a financial advisor.