Why You Should Always Save to Invest NOT Save to Save
If you’re saving money, you’re doing better than 21% of Americans. But what are you saving for? Is it a lavish vacation or a new car? Or are you using that savings to invest in your future? Hint: one of these is smarter than the other!
What is Saving to Invest?
Some people are natural savers. They love to save their money for any reason. And there is no problem with this. But what good is it to have a large savings if you never end up using it? Yes, you will be prepared for any emergency or problem that arises, but you won’t be progressing your finances any more than you were previously.
Saving to invest is an important concept to learn at an early stage. The goal of your savings should be to let your money work for you instead of letting it sit. By letting it grow you can rest assured that not only do you have enough in your savings in case of an emergency, but you will also have a steady stream of income from your savings.
How to Save to Invest?
So how do you save to invest? There are many ways to go about it. It might mean opening up a high-interest savings account or certificate of deposit (CD) or it could mean automatically investing your money into stocks or bonds. Either way, the end goal is the same.
Make Saving a Priority
It’s impossible to save to invest without saving. That might seem obvious but for some, this is more challenging than for others.
The best way to save to invest is to automate your savings. You can set up automatic investments so that you don’t have to do any of the work yourself. You specify how much you want to invest, how frequently, and your investment strategy and the rest is done for you.
Apps to Automate Your Investing
There are many different apps that can help you automate your investing.
Acorns rounds up small purchases and invests that money for you. It’s as simple as that. No extra work needed!
SoFi, you’ve probably heard of them from student loan refinancing, offers automated investing. You can even choose to invest in one of their low fee ETFs making it that much easier to get started.
Chose the Right Way to Invest
Many people don’t know where to get started when it comes to investing. And part of that reason is because of the abundance of options. Stocks, bonds, mutual funds, ETFs, and many other options are available to invest in, so which one is right for you and your savings?
Opt for Low to Medium Risk Assets
Because you are investing your savings, you might want to opt for lower-risk assets, like corporate bonds or mutual funds. These options will help to mitigate SOME of the risk that comes with investing. Yes, we said some. That’s because anytime you invest, there is a chance that you could lose your money. And typically the higher the risk, the more you will get in return.
We wouldn’t recommend putting your money towards speculative investments like cryptocurrency or high volatility stocks. Instead, we would recommend putting your money in something like a low fee mutual fund or ETF. These will offer a good risk-reward ratio for your savings. Not sure how to invest in those? A simple Google search should guide you down the right path of you can use SoFi to invest in their low-cost ETFs.
What is Saving to Save?
Saving to save is simply the act of saving with no goal other than to have a savings. And while there isn’t anything wrong with saving to save, there are better options to help you progress your finances.
Top Reasons People Save to Save
Many people don’t invest their money because of the thought of losing it. And while there is the possibility, the more time you give it, the less likely it becomes. If you don’t have a long time to give your money, you could at minimum deposit your money into a high-interest savings account.
2. Lack of Knowledge
The next top reason people save to save is because they don’t know anything better. Their lack of knowledge leads them down this path. But investing can actually be quite simple. Don’t let the slang and jargon get to your head.
3. No Goals
If you chose to save just for the act of saving but understand how investing works and how to do it, you might be fine with where you are at financially and don’t feel the need to progress your finances. And that’s OK! In fact, congratulations! Many people will never reach this state of financial satisfaction so kudos to you.
Best Ways to Increase Your Savings:
The best way to increase your savings is to trim down your expenses. There are many different ways you can do this but some of our favorites are:
- Cut the cable
- Cook at home and eat out less
- Lower your utility costs
2. Increase Your Income
Growing your income is another obvious option to boost your savings. Because your income will increase and your expenses remain steady, you will have more money to contribute to your savings. Read our full post here to learn the best skills to boost your income.
3. Automate Your savings
Like we’ve mentioned, automating your savings is a great way to keep it growing. Sign up for an automated investing service like Acorns and watch your money grow.
4. Get Rid of the Fancy Car
Car payments can be disasters to your finances. Consider selling your car, paying off your auto loan, and purchasing a car with the leftover cash to lower your monthly expenses and boost your savings.
5. Only Purchase Things you Need
Do you think you need that new coat or do you really need that new coat? You should only purchase items you actually need in order to save more money.
Many of us are taught at a young age that you should save your money. And you should. But the question we urge you to ask yourself is “what am I saving for?” If the answer isn’t to make your future better, well, maybe it’s time to rethink your saving strategy.
Saving to invest is an important step in your financial journey. If you want to achieve lifelong wealth and retire without a worry in the world, this is a major piece of that.
What is your experience with saving to invest? Has it helped you on your financial journey? Comment below!