What To Do With Your Money?

People are usually confused whether to save their money or invest it. And often their financial plan is skewed towards either of them. Saving and investing, both have their advantages and disadvantages. And an appropriate combination of both of them is needed to make a perfect financial plan.

Hence, firstly, it is necessary to understand what it is the difference between saving and investing.

Saving is putting money aside especially into cash products such as putting money in a bank account and investing means to put your money in financial products that allows to grow your money. Here are few things to remember when and how much to save or invest.

For short term goals you can save and for long term goals you can invest. Short term goals are those goals that you are planning to do in next five years. And long term goals are once where you won’t need the money for 10 years and more.

Investment provides higher returns but are bit illiquid and come with little risk. But just saving your money may not be enough to fulfill all your future requirements. As putting money in bank account may not come with risk but it gives low returns. Hence, for long term goals you need to invest so that you can reach your financial goals faster. To enhance the earning capacity of money, you need to invest.

For short term goals don’t invest in risky assets such as stock markets as it may go up or down in short term. For short term goals you can save in bank account. The funds that are required immediately and for emergencies should be held in bank accounts.

As an emergency fund, the thumb rule says that you have at least three months of your regular expenses in your savings bank account so that you can have easy access to it.

For long term goals, it is often best to invest because inflation can affect the value of cash savings over the medium and long term. The stock market usually tends to do better than cash over time. You can start investing as early as possible. You can set your financial goal that is few years away such as your child’s higher education or marriage and assess how much amount you will require to achieve that goal, factoring in inflation, and invest accordingly.

Remember to keep a track of your investments in regular intervals and if required make suitable changes.

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