It is possible that at some point in your life you have asked yourself this question and it is very reasonable, because this will be a very important decision, so this time we will see what the difference is between saving and investing, so that from there you can analyze your possibilities and see what is best for you.
The two alternatives would be valid to meet your personal goals. On the one hand, saving means setting aside a portion of your income to spend later, while investing means putting your saved money to work to generate a return on that money.
Why save?
It will always be useful and important when saving to have a goal, an objective, it answers the question “Why do I save?” This goal must be concrete and realistic, it is also important that you define a deadline or in what time you will meet it. You can define several goals, but it is important that you order them according to their priority.
Saving can be very advantageous, as it allows you to:
- Coping with unexpected or emergent situations, such as illness or job loss.
- Have some security and stability in the future.
- Achieve goals, be they short term (buy a computer, cell phone, travel and vacation) or long term (buy a car or house).
That is why we recommend you make a good budget and apply the 50-30-20 rule, which consists of allocating 50% of income to cover basic needs (rent, food, water, electricity…), 30% could be left to treat yourself (leisure activities, vacations…) and 20% would be the basis for savings.
Why invest?
If the goals to be achieved are medium or long term, this is the right choice.
A good investment makes your money grow and allows you to have assets for the future. In the world of investments there are options and alternatives for everyone, from those looking for low risk, to those who decide to risk more to increase their capital.
As we have already mentioned in another article, investing in real estate can be an excellent alternative, but you also have the possibility of investing in stocks or financial instruments, each one has different levels, both of risk and return.
Something very important that you should keep in mind is that there are two factors that will influence the growth of your capital:
- In the event that you decide to save, it will be the amount of money.
- And if you decide to invest, it will be time since the longer you have your money invested, the higher the profit you can receive.
