Should You Save or Invest? - Molen & Associates

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Should You Save or Invest?

One of the hardest questions we ask ourselves is whether we should save our money or invest it. Keeping our money in our account for emergencies can help us feel safe in knowing it’s available when we need it. On the other hand, choosing to invest will help with our future when we retire by helping our money grow while not being easily accessible.

How much should I keep in a savings vs investment?

The amount in your savings should be sufficient to cover your expenses for three to six months. Another reason to make sure you have plenty of money in your savings would be “any specific purpose in your life that will require a large amount of cash in five years or less should be savings-driven, not investment-driven. The stock market in the short-run can be extremely volatile, losing more than 50% of its value in a single year.”

Basically, once you are prepared financially in your savings account then it is a good idea to start investing. Investing is very important because your money will grow and you’ll be making more money. Savings accounts are great for emergencies and emergencies do happen, but money in your savings account just sits there and it does not grow. It is important for your money to be growing because it will set you up for retirement. If you do not allow your money to grow then you will be in trouble later in life. You will become a burden to your children and you will not be able to take care of yourself and possibly even your family if needed.

Should I open a savings account or invest?

Both. You should open a savings account and you should invest. So, who should save? Everyone should save! One thing that you need to set aside all that money that you are saving for is an emergency fund. Unfortunately emergencies do happen so it is important to build up an emergency fund so you can cover any emergencies that occur.

My brother loves to play the guitar and sometimes he will make up silly little songs that have us all rolling with laughter. When my husband and I were engaged and getting ready to be married I asked my brother to write us a song. I thought that meant that he’d write us a sweet, tender song like some that he had written before, but that did not happen.

He went with the funny light-headed song instead. So as I was standing at the top of the stairs he began to sing, “you’re poor, you’re poor, you ain’t got no furniture on the floor.” There was more to the song, but basically he was trying to help us understand that soon we’d have a lot of expenses and many of them would be unexpected. After we were married we learned that he wasn’t far off with the lesson he was teaching in his silly song.

Now that you have an emergency fund open you should KEEP SAVING! Strive to save up to 10% of your earnings every month. If 10% is too much then save as much as you can afford. These savings will help you to one day purchase something that you want like a house, a trip, etc. The only time that saving is not necessary is when you are in debt. It is easier to save once you have your debts under control. Depending on how much debt you have, this may require you to exercise some patience and even more self-control in your spending habits. Now let’s touch a little bit more on investing.

Is investing really worth it?

You can determine this by looking at your goals and splitting them up into three categories: short-term, medium-term, and long-term.

  • If your goals are short-term then investing is not for you. When you invest for less than five years it will most likely end up in a loss. So if you’ll need the money in the next five years then you should probably leave that money in a bank account.
  • Medium-term goals get a little bit trickier. These goals are more than five years, but smaller than ten years.  It might be best to just do cash deposits, but ultimately you would make a greater return if you had just invested the money. In addition, money that is sitting in a savings account could be at risk from inflation. So really and truly keeping your money in a savings account and investing at this stage could be a little risky. Decide what you want to do and accept the consequences and/or enjoy the blessings of your decision.
  • Long-term goals gives us an easier direction to take. Investing should definitely be the direction you take when you have long term goals. When we talk about long-term goals we mean saving for retirement.  Investing is always risky, but the way to create more of a safety net and to lower the level of risk while investing is to diversify your investments. Diversifying your investments means you “spread your money across different types of investments”.

What are the benefits for saving money?

Here are some good key points when it comes to saving money:

  • Being a good saver puts you ahead of the game
  • Saving is about putting aside money for future use. Investing is about putting your money to work for you with the goal of growing it over time.

Both help you to save money and create financial security for yourself. You can successfully build your financial future as long as you save and invest

What percentage of money should you invest? Save?

According to this website, it is good to save at least 10% of your earnings each month. If you cannot afford to save at least 10% of your earnings each month, then make a goal to save as much as you can afford.

The percentage of money you should invest really just depends on your goals: short term, medium term, and long term. Ultimately you need to decide on a percentage and be diligent in sticking to it unless something really affects you. Between 10 – 15% of your annual income would be an appropriate amount to invest. Again, everyone is different and you need to choose what is best for you. Here at Molen & Associates we have a great financial advisor who would be more than happy to counsel you on how to get started.

What is the purpose of an investment?

Investing is extremely important. You can grow your income by working and then once you have a sufficient amount enough for your needs, you need to start investing. Your fortune will grow over time because one’s assets increase in value over time. If you have no assets then you don’t have money just growing on its own.

“It’s never too late to become an investor. You may be well into middle age before realizing that life is moving quickly, requiring a plan to deal with old age and retirement. Fear can take control if waiting too long to set investment goals, but that should go away once you set the plan into motion. Remember that all investments start with the first dollar, whatever your age, income, or outlook. That said, those investing for decades have the advantage, with growing wealth allowing them to enjoy the lifestyle that others cannot afford. Whether your goal is to send your kids to college or to retire on a yacht in the Mediterranean, investing is essential in reaching your financial objectives in life.”

How to prepare to invest? And who with?

  1. Decide whether you want to take a “do-it-yourself” or “manage it for me” approach
  2. Identify your financial goals and how soon you’ll need the money you plan to invest
  3. Pick the type of investment account you’ll use (401(k), IRA, taxable brokerage account, education investment account)
  4. Open an account
  5. Choose what investments match your risk tolerance (stocks, bonds, mutual funds, real estate)

Your next step

Molen and Associates has diligent and experienced tax advisors who can help you decide which decision is best for you and your family. We don’t just take care of your taxes but look at the entire picture and help you determine where you can save and budget your money. Take that next step and call us today to set up a Personal/Family Finance appointment to get your life and financials on the track to success.



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