Investing vs saving: how to know which method benefits me the most for my money

You can learn the advantages of each of these alternatives to decide what to do according to each person’s interests and financial health.

Promoting savings is essential for financial well-being since it generates stability. In addition, it allows you to face unforeseen events and difficult situations in times of economic uncertainty. Saving and investing are two options that can help fulfil personal projects and goals. Saving means saving a part of the income to spend later while investing consists of putting the money saved to work to generate a return.
In that sense, BBVA emphasises that knowing the advantages of each of these alternatives is essential to decide what to do at all times according to each person’s interests and financial health within the framework of World Savings Week. Investing vs saving: how to know which method benefits me the most for my money

The good habit of saving

One of the main reasons you fail miserably when it comes to saving is not having a pre-established plan and limiting yourself to setting aside the money left over at the end of the month. Using a rule like that of 50-30-20 could work to enter the world of savings. You might be in interested in Labor Well-being: Reasons why labour disengagement occurs in Companies.Investing vs saving: how to know which method benefits me the most for my money

What do these numbers mean?

  • 50% is the percentage that must be allocated to the total income to cover basic needs (food, electricity, water…)
  • 30% is the amount that could be left for whims or desires. (For example: leisure and vacation activities)
  • 20% would be used to constitute the basis of the savings.

Financial instruments can help attain personal goals or provide a cushion for unexpected circumstances. “Savings banks are easy to use, commission-free, and you can get your money out quickly,” the bank advised.

Indistinctly, there are also current accounts that are demand deposits; that is, the holder can withdraw his money, in part or its entirety. Unlike the savings account, this one does require a specific amount that varies according to each bank and does not generate interest on the balance it has at the end of the month.

The option to invest

On the other hand, BBVA said that investing also has excellent benefits. “If the goals you want to achieve are in the medium or long term, this is the right choice,” the bank added. To grow wealth, the world of investments has options for all kinds of profiles from people looking for low risk, with a minimum return to those who decide to risk more to increase their capital.

“You can invest in real estate or real estate, stocks or financial instruments; each has its risk level and percentage of return. From an app, you can use a series of tools, simple and free, to make it easier to find and hire an investment fund that fits the needs and objectives,” BBVA said.

The amount saved and, in the case of investments, the time will affect capital growth.

What are the differences between saving and investing?

To gloss out both terms, AFP Habitat explained what the differences between the two actions are:

  • When we save, we accumulate money, when we invest we seek to increase it.
  • Generally, savings pursue short-term objectives, while investment is more oriented towards the medium and long term.
  • Investments risk losing money, but savings are safe.
  • To save, we need to organise our daily expenses better; to invest, we also have to think about how much risk we can take, what we will invest in and why.

Is it more convenient to save or invest?

  • If you haven’t saved for an emergency, save. However, investment is best if you want to make money.Investing is better for long-term goals than saving for short-term ones like paying off debt or buying something you like.
  • If your plans are short-term, such as paying a debt or buying a product that interests you, saving would be good; but for long-term objectives, the ideal would be to invest.

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