Saving and investing are the two most important aspects of good financial planning. But why are they so important? And what are the perks of both financial approaches? Let’s see within the next lines.
Why saving and how to do it right?
Saving your money and creating emergency funds doesn’t require any risks, and it costs you next to nothing. Banks have little or no fees to open a savings account and deposit money there.
- You’ll worry less about your money. When you have some cash on hand, you won’t panic if you suddenly have to face unforeseen expenses.
- You keep an eye on your budget. Putting aside a little bit each month gives you a better idea of what you’re spending your money on.
- You learn to see the big picture. Have you always wanted to go to Japan? Do you dream of buying the latest smartphone? Having a goal in mind makes saving easier.
- You become more independent. Borrowing money might sound tempting, but in the long run, it’s not a good idea. If you have a little bit of money aside, you don’t depend on anyone.
Does saving still make sense?
We hope we have convinced you that saving is the right thing to do. Savings account interest rates could be very low right now, but don’t let that put you off.
When you have already built up a small financial reserve, you can consider other options offering a higher return. For example, you can make your money grow by investing in financial markets like stocks, cryptocurrencies, or real estate.
When you want to entrust your money to save, you are looking for the banks with the best interest rates. The same goes if you want to invest. In case you chose, for instance, the Forex market, you will go for the Forex broker with modest fees and customized trading accounts.
How much should my savings be?
It is commonly accepted that an amount equal to 3 monthly wages is sufficient, but some argue that it is better to have six times that amount aside.
With a net monthly salary of 2,700 euros, for example, your emergency fund could be between 8,100 and 16,200 euros. Of course, a higher amount offers even more convenience, but make sure you have a realistic and achievable savings plan.
Make your money grow – Investment benefits.
However, saving money is not sufficient to reach financial freedom. That’s why t is important to think of investments.
If you invest, you can benefit from several positive effects:
- Enjoy a good performance by growing your savings over a long period
- Earn more money than if you had left your money sleeping in your savings accounts
- Make the money you’ve earned grow
This tremendous snowball effect becomes very interesting in the long run. In a few years, you will have financial means to give you more wiggle room to choose and carry out your projects.
Investing without “putting all your eggs in one basket.”
Have you ever heard this sentence? This phrase is common, but it doesn’t mean much to many of us. You may not know it, but behind this expression hides a question of diversification.
That’s an essential rule for investing your money well. You shouldn’t focus on only one financial investment. Instead, you can diversify your investments to spread the risks of your financial investments.
But, of course, it’s impossible to know what will happen in the financial markets tomorrow, the fate of a company or the evolution of the real estate market.
Online investors should always choose the trading intermediaries offering as many financial instruments as possible.