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"Saving VS Investing: When To Choose One Over The Other"

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We have been taught to save money ever since we were children. Remember your first piggy bank? Or first time your parents opened a bank account for you? Many of us still do. Save your money, gain interests, and you'll profit over time. At least, that's what our parents and grandparents taught us.

However, with today's interest rates, profiting by saving your money in the bank seems questionable. Today's Bank of America standard Annual Percentage Yield is only 0.01%. This condition drives more and more people to look for other opportunities besides saving their money in the bank, and of course, investing is one of the most desired options for most people.

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Investing can provide huge amounts of profits, even can exceed 1000% a year when you are very lucky. However, there are some things you should consider when deciding whether to save or invest your money. Certainly, saving your money in the banks still have its benefits, some of the notable ones are:

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1. Risks Involved

Obviously, saving your money in the bank is a (much more) safer option. In the U.S., money saved in the bank is insured by the FDIC (Federal Deposit Insurance Corporation).

Investing, on the other hand, will always involve risks in some form or another.

2. Access

Saving account will still give you the access to ready cash when you need it. On the other hand, an investment will often require a commitment where you can't access your money for the agreed amount of time.

Generally, the larger the risks involved in an investment, and the longer amount of commitment, the higher the potential profit will be. Refer to our previous article about low-budget investment tips to get a clearer picture before you decided to invest your money.

Make sure you already have an emergency fund set up for these needs of ready cash if you are deciding to invest your money somewhere. Nothing is worse than losing all your money in an investment. Remember, you still have the responsibility to feed yourself and your family.

3. Interest VS Profit

In general, profit potentials offered by any investment opportunities will be (much more) higher than any saving interest rates. However, as mentioned there will always be risks involved with any investments.

Gaining interests, albeit very-very small, over a significant amount of time will still be better than losing all your money in a 100% a year investment.

Before deciding on any investment options, make sure you to weigh the risks involved, the reputation and historical data, and whether the risks will be worth the profit.

Conclusion

Saving your money will be preferable if you are not sure whether the needs to access the ready funds will be needed, or if you can't bear the risks involved in an investment opportunity.

You can diversify your investment option to a long-term based, safer opportunities (more than four or five years), such as college education funds or Deposit accounts offered by many investment companies and banks.