What are Savings?
A savings account is often thought of as an interest-bearing deposit account held at a bank or other financial institution. Though these accounts typically pay only a modest interest rate, their safety and reliability make them a good option for parking cash that you want available for short-term needs.
However, if you want to save regularly and would like to see your savings grow over time, why not consider investing in a managed fund?
If you have children or grandchildren and want to save a bit of money for their future, come and talk to us about what we can do for you.
Why Saving is so Important?
It can be tough to allocate some of your cash to a savings account if you don’t have a set goal for that money. Why save for later when you can spend on what you want today?
But among the many reasons to save money is that even if you don’t know exactly what you’re saving for right now, you’ll likely find something you want to save for in the future.
A new car, a new home, a child’s education… the possibilities are endless. Plus, it’s critical to have some cash set aside for emergencies and unexpected expenses as they come up.
The Difference between Saving and Investing
There is a huge difference between saving and investing. Both saving money and investing money have a place in your life, but they play very different roles.
How you handle these two things can have big implications for your financial success and stress level, and how wealthy you will ultimately become. It can even mean the difference between suffering through a recession or depression and sleeping soundly through the night, knowing that you have enough spare liquidity on hand.
Saving money is the process of parking cash in extremely safe accounts or securities that can be accessed or sold in a very short amount of time. Investing money, though, is the process of using your money or capital to buy an asset you think has a high probability of generating a safe and acceptable rate of return over time—even though it may decrease for years.
Benefits of Compounding Interest
As you invest, you are putting your money to work for you, harnessing the power of compounding returns. The earlier you start the better, since the longer the timeframe, the more investments can compound and grow. Here’s our guide to how compounding works.
The secret to compounding is time: time in the market, not timing the market. Jumping in and out with quick trades often can be expensive, and you can easily miss out on those few days that bring the most growth.
When investing is ‘little and long’, you can take advantage of ‘dollar-cost averaging’, which is investing amounts regularly – buying less when assets are more expensive, buying more when they are cheaper. It’s a brilliant system for growing over time.
