Saving versus investing

Should you save your money or should you invest your money? In today's volatile market many people are asking that exact question.

Saving your money is traditionally the act of storing your extra money safely in a bank for short term needs such as expenses or emergencies. You will typically earn a low interest rate for keeping your money in the bank but you will also be able to withdraw your money more easily.

Investing your mean is when you take a risk with a portion of your savings or your extra money. When you invest your money you are buying stocks or bonds in the hope that the initial investment you make with your money is more or that you have a higher return. Investments need time to grow and are not as easily accessed as a normal savings account.

Saving your money in a bank savings account may not give you the guarantee of growing like investing can. When you put your money into a traditional bank savings account you will be getting a paid a fixed interest rate on those savings and that makes you feel good. However, the interest rate does not take into account the cost of inflation and what may have looked like a good deal a few years ago is not such a good deal when you need the money.

Investing your money over a period of time will help your money to grow at a faster pace than with a traditional savings account. Investing your money can give you a higher return even with inflation factored in the equation. Investing your money can give you a higher return because those investments can outpace inflation unlike their opposite savings accounts.

Saving your money in a traditional bank account gives you easy access to your money whenever you may need it. If you have a debit card it is even easier to access your savings account through any ATM. You can transfer money however you please whenever you please without any penalties. If you are looking at saving money for short term gain as in a big purchase or just a small nest egg then a traditional savings account is for you.

Investing your money requires a long term commitment in order to get the highest returns. Many types of investments require that you keep the money in the investment accounts for 3 or more years. Getting the money out earlier than that will cause you to pay a penalty and perhaps even lose money. If you are looking at making more money for retirement or just to "see what happens" then investing might be the way to go for your needs.

Putting your money into a savings account requires very little risk. Your money is insured by the banks and so you can then be assured that whatever money you put into your account you will also be able to get out of your account at any given time. If you are saving your money for short term goals you may want to use a savings account for the extra stability that those funds will be there when you need them.

Putting your money into any type of investment is more risky. Your money will not be insured by the investment firm. When investing you money you will need to ride out some of the bad times in those investments. You hope to make a larger return on your initial money but it is not guaranteed. If you are looking at having this money many years down the line then investing the money and keeping it there for the long term could be your best option.

Saving versus investing really depends on what you need the money for, when you need the money and how risky you want to be with your money.