Saving Money vs. Investing Money: Finding the Right Balance Between Saving and Investing

I’m always on the hunt for relevant info and I loved this - one of the best articles I’ve seen on this topic for a while. Here are a few paragraphs as a taster...

What Is the Definition of Saving Money?

Saving money is the process of putting cold, hard cash aside and parking it in extremely safe, and liquid (meaning they can be sold or accessed in a very short amount of time, at most a few days) securities of accounts. This can include checking accounts and savings accounts secured by the FDIC. This can include United States Treasury bills. This can include money market accounts (but not always money market funds as you need to look at the holdings and structure closely).

What Is the Definition of Investing Money?

Investing money is the process of using your money, or capital, to buy an asset that you think has a good probability of generating a safe and acceptable rate of return over time, making you wealthier even if it means suffering volatility, perhaps even for years. True investments are backed by some sort of margin of safety, often in the form of assets or owner earnings. As you learned in How To Start Investing, the best investments tend to be so-called productive assets such as stocks, bonds, and real estate.

How Much Should I Save Versus How Much Should I Invest?

Saving money should almost always come before investing money. Think of it as the foundation upon which your financial house is built.

The reason is simple. Unless you inherit a large amount of wealth, it is your savings that will provide you with the capital to feed your investments. If times get tough and you require cash, you'll likely be selling out your investments at the worst possible time. That is not a recipe for getting rich.

Pretty valuable stuff, I’m sure you’ll agree! Why not check out the whole article here https://www.thebalance.com/saving-money-vs-investing-money-358062 and share your thoughts with me afterwards: Otherwise feel free to reach out to me on 0432 132 123 or email [email protected]

Thanks,

Arthur