There are different kinds of arguments in the financial world that gurus and laypeople like to engage themselves in. On a national scale, some question the devaluation of currencies to help improve the economy in the long run. On a personal scale, some argue about the wisdom in purchasing a particular stock. A few others discuss the power of compound interest. However, among all the different kinds of arguments, one of the most popular is that of savings vs investment.
For as long as we care to remember, people have always wondered whether or not it is a better idea to save your money instead of investing it. While some would argue that you should indeed keep your cash in the bank, others will say it is an absolute waste of time. But, which of these schools of thought actually holds water considering the current economic situation? In a battle of savings vs. investment, which financial decision comes out on top? Let us examine both separately. Afterwards, maybe you’ll be able to make an inference.
In its most basic form, the entire purpose of saving is to preserve your money for future use. While there are different places you can save your money, banks are still the most popular options in today’s world.
Now, if your only intention is to save money so that you can use it in the future, then, saving in the bank is exactly what you want to do. The best part is that unlike the local “kolo,” banks would even give you interests if you save with them.
While this might seem like a good thing, things aren’t that simple. In fact, they become a whole lot more complicated when you factor in the country’s economy. In a country where inflation levels are constantly increasing, the value of your money would become lower and lower with every passing year.
In the end, you’ll still have the amount of money you saved. However, your money will be able to buy much less than it was able to at the start. Your only saving grace will be if your bank offers interest rates equal to or higher than the country’s level of inflation. However, this isn’t a very feasible thing with most banks in the world.
Now, this is an entirely different story. Investment, unlike savings, is not just you setting aside money for a time when you might need it. When you make an investment, you are hoping for that cash to bring you more cash in return. There are various places you could invest in from real estate to stocks, and even treasury bills, among others.
However, the downside to investment is that, depending on where you choose to invest, there are risks involved. That is, you could end up losing money in the process. This is one of the main reasons people would rather save up their cash. The uncertainty that comes with investment is too frightening for some. However, if you have the stomach for it, it can be very rewarding as it helps you preserve the value of your money by offering returns even higher than the country’s inflation rate.
To bring everything to a close, it is important for you to note that neither venture is entirely better than the other. They each have their advantages and disadvantages. However, you’re only likely to lose if you don’t know what you want.
So, if you are looking to put your money aside for the future, save. If, however, you want to stay on top of the economy and preserve your money’s value, invest. To minimize the risk of losing out too much, combine both methods.