Saving vs Investing: Where Should You Put Your Money First?

Saving vs Investing: Anyone starting their financial journey always wonders at one point: Should I first save or invest? Both investing and saving are essential tools of wealth creation, but they serve different purposes and should therefore be prioritized based on your financial goals and situation at a given time.

Understanding Savings

Saving generally means keeping your money in a safe place where it can be accessed quickly, such as in savings accounts or fixed deposits. The main purpose of saving is that it carries security and liquidity. This is the fund you dip into for emergencies, medical needs, or sudden expenses. However, generally, the returns on saving accounts are low and may not withstand the test of time against inflation.

When Saving Takes Priority:

You do not have an emergency fund.

You live paycheck to paycheck.

The, You save for a short-term goal (like a vacation or wedding).

All these factors mean that you want your money to be at low risk and be immediately available for use.

Understanding Investing

Investing is the act of allocating money towards something considered an asset, with the expectation of increasing the amount of wealth over time. Investing, while risky, generally provides better returns in the long run and has some protection against inflation.

When Investing Takes Priority:

You already have a safety net (emergency fund).

Your goals are long-term (retirement, child’s education).

You are ready to take calculated risks for higher growth.

You want your money to grow faster than traditional savings methods.

ALSO READ: Silver Investment: How to Make Profits with Long-Term Investment

Saving vs Investing

Starting with saving should be your first step. Establish an emergency fund covering at least 3-6 months of expenses. Once that is taken care of, start switching to long-term investments. The best option is to do a little of both; this is in stage order depending on your current financial position.

Secure First, Grow Later

Saving gives you financial stability; investment gives you financial freedom. Choose wisely at every stage of your life, though both ensure a rosy financial future.