Saving vs. Investing: Which Should You Do and When?

Savings and Investing is as different as night and day. If you are looking for a chance to earn extra cash you should know the difference. Keep reading to find out the difference between Saving and Investing, which is the better option for you, and when you should save or invest.

There are many companies, such as Brokerages, can help you start investing. Similarly, you compiled a list of the best Savings rates to help you maximize your earnings.

Savings Accounts

Savings accounts are a financial cushion of sorts, that is incredibly safe and secure as compared to investing. We consider these types of earnings risk free. Savings is ideal for you if:

• An Emergency Fund: Savings accounts come in multiple forms, such as Health Savings Account (HSA), that helps mitigate healthcare expenses. Similarly, you can start saving for retirement by setting up an Individual Retirement Account (IRA). You won’t be able to work forever or you may not have dependents that you can rely on to help you.
• You need cash over the long term: While savings rates are incredibly low and non-impactful immediately, you can still earn guaranteed returns. The more money you keep in your savings account, the more you will earn over time. Certificates of Deposit offer higher rates based on your term lengths.

How To Pick A Good Savings Account

Most financial institution offers a savings account of some sort. Credit Union’s, for example, require you to open a savings account to join. Consider these attributes before opening a account.

• High Annual Percentage Yield: You will notice that most basic savings accounts only offer 0.01% APY. However, when you find a high enough Bank Rate, you will earn more money than basic rates.
• FDIC Insurance: This is federal insurance that protects your accounts. Some banks and financial institutions aren’t insured and we suggest you look elsewhere. You can expand your insurance coverage by opening joint accounts.
• Monthly Fees: Service and administrative fees are really the only thing that can take value out of your savings accounts. Before applying for an account you should know about any hidden fees, monthly service charges, etc.

Because Savings Accounts are so safe, interest rates are fairly low. Savings accounts are more fit for people with large amounts as they will earn more over time.

Investing

Investing your money can potentially be more profitable than a savings account. Investing offers higher returns but are riskier.

Investing isn’t as simple as a Savings Account, but it can be. Certain services like Mutual Funds, and automated advisers only require you to deposit money to take advantage of unique rates.

How To Pick an Investment Account

If you are an inexperienced investor you may want to consider a Robo-Advisor, or brokerages like E*Trade, Ally, You Invest by J.P. Morgan, or TD Ameritrade. While working through an adviser may cost fees, some of these accounts offer free trades and other perks to help you get started.

• Robo-advisors are online, automated portfolio management service. Companies use a set of sophisticated computer algorithms for appropriate investments based on your risk tolerance and time horizon. Next, an accurate investment portfolio is automatically set to fit your finance needs and realistic wishes. They offer similar benefits of an investment service at fractions of the cost.
• Brokerages are the gateway to the investment world. They are financial entities that you can purchase investments through. They offer the greatest flexible in terms of your portfolio make-up as you pick out the individual investments. Additionally, these accounts offer advisers you can speak to, etc.

Author’s Verdict

Whether you decide to invest or save, you should always explore options to earn more cash for yourself. While investing can be more complicated to learn, they offer higher returns on your deposits.

However, if you want a safer means to earning cash, consider a savings account with a high enough interest rate to maximize your earnings. Explore Bank Promotions before joining a financial institution to earn a bonus for joining or opening an account.