When you hear the word "Saving" you might automatically think "Boring." If you're working for your money, the last thing you probably want to do is not spend it.
But unfortunately almost everything you buy today will be worth less in the future, or even worse, no longer be around. On the other hand, if you save or invest your money, that money should actually be worth more when you need to use it.
Things to consider regarding saving and investing
Goals – What is the purpose behind the money you’re saving? You’ll want to think about this before you start saving any money, as this will affect the various options you should explore.
Risk – Generally, Savings options are low or no risk opportunities. Investment opportunities are not insured and are subject to risk from various market factors. These investments generally offer a higher potential for return, but come with more risk. Take a look at the Time Value of Money for more information.
Return – Return is the amount or percentage that your money makes in a saving or investment opportunity. This is normally the Annual Percentage Yield (APY), meaning an APY of 10% would grow your money by 10% in a full year of saving or investment. As stated above, savings will generally provide less return than an investment.
Inflation – Some things cost less 5 years ago, and some things will cost more in 5 years. A dollar is still 4 Quarters, but a dollar used to be 2 cans of pop, and now that won’t even buy you a 20oz bottle. When you look at where and how to save your money, you should consider that what you put away today is a smaller value than that same amount in the future, so you’ll want to find a saving option where your money will be worth more tomorrow than it is today.
