Every individual strives to increase wealth by saving and making the right investment decisions. However, it is important to note that there is a key difference between savings and investment. Only when you understand this, you will be able to grow your wealth.
What is savings?
If you have the question in mind, “what is savings?” then you need to understand its basic concept. Savings is an act of putting aside money from the income you earn. You generally save up for a certain purpose such as buying a home or covering any emergencies.
What is the definition of investing money?
You need to know what investment is to understand how it is different from savings. Investing money is taking some of your money and trying to make it grow with the objective of increasing its value.
How much should I save versus how much should I invest?
Saving is always the first step followed by investment. Saving is the foundation on which you start investing. Your savings provide you with the capital to invest. They should be adequate to take care of all the personal expenses for a period of six months. Hence, even if you lose the job, you will have enough time to look after your financial requirements without any pressure. When it comes to making any investment, your objective should be savings-driven, as savings would lead to an investment. You need to consider the investment products and tenure before you invest.
Who should save?
Each one of us should do our best to save money. If you want to know when to start investing, you need to start saving first. You need to save for an emergency fund that will provide you with financial security. Additionally, you need to continue saving for a secure future.
More information about saving money
There can be many reasons for you to save money. You can either set a goal before you start saving or you can look for an investment option and then work towards it systematically. Invest your money in a savings plan to help it grow.
What should I invest in?
You can consider various investment products. However, the first investment you must consider is a savings plan insurance to earn good returns in the long-term. In addition, an investment in a term insurance cover will provide financial security to your loved ones in case of any unfortunate event.
When should I start investing?
It is best to start investing when you have paid off the majority of your debt. If you do not have any debt, you can start investing right away. It is a good idea to have a solid emergency fund before you begin investing. Set aside money in the fund and then make investment plans.
The investment will help you grow your wealth but you need to keep in mind that you should continue to save. You will only be able to build a strong investment portfolio when you spend less, save more, and stick to a budget.