By Breana Whitfield, Virginia State University Mass Communications Intern
Saving and investing money may be used interchangeably, but they’re different by definition and impact. While saving is the act of putting money aside in a safe zone to be pulled as needed, investing opens a window of opportunity to make more money than you begin with and generate wealth.
The first step to financial success is to develop a habit of saving, but saving money requires a tremendous amount of discipline. To start a habit of saving, set aside a percentage of money from your paycheck or other sources of revenue to deposit straight to an account every month. And then, don’t touch it! The money you put aside will grow overtime; saving even a small portion of your salary can contribute to the nest egg that’ll help you reach financial goals.
“One of the best ways to start building savings is the ‘out of sight, out of mind’ mantra,” says Shanté Nicole, Financial Educator and Credit Coach. “Consider opening an online savings account through a bank that’s not easily accessible.”
Shanté Nicole
Knowing the basics of personal finance is important to your financial confidence and security. It is important when monitoring your finances to know the flow of your money, or “budget”, to help make smart choices between what you need now and what can wait. Having control of your finances helps to take control of your future.
Financial advisors like Shanté Nicole recommend having around three months’ salary in your savings account, which can be used for various needs and occasions. Outside of it being a necessity—you never know when you’ll need to dip into an emergency fund—saving shows that you make responsible decisions for your future. Consider your “why” when it comes to saving. Maybe you need an emergency safety net for life’s unexpected moments.
There are a variety of ways to begin saving money. The best way is to automate it so that you don’t have to take the extra step of transferring money manually into your savings account.
“Automate a specific amount of money bi-weekly or monthly into that account, advises Shanté. “It’s best to start with a $1000 emergency fund.”
While most are familiar with the ways to saving money, many are not sure where to start when it comes to investing. Investing helps your money grow faster than the rate of inflation. The most popular modes of investing are through purchasing stocks, bonds, or real estate. Savings bonds are backed by the credit of the government and are considered the safest investments available, and the interest made on bonds can be paid out gradually over time.
Once you’ve saved enough money to reach your goal, consider investing in products that are almost as accessible as having cash. One commonly known savings investment is a certificate of deposit, or CD, which allows you access to your money with a low risk of loss. Long-term savings are investments in stocks, which are small pieces of ownership in a business. Stocks fluctuate depending on the market and the specific company’s future expectations.
Another viable investment option is mutual funds, which are put into “baskets of stock” by a fund manager. This is for the risk-averse; you run a lower risk of losing money, and you don’t have to be as well-versed about the specific companies in which you’re investing.
It may seem intimidating, but saving and investing in your future is possible. Consider your personal goals, and then decide which option is most fitting for you. Sit with an investment banker or financial assistant at your local bank or credit union, and get on the journey to doubling your buck and securing your financial future.
