Why Save & Invest?

Does saving seem to be out of the question when you hardly have enough money to pay your bills? Successful money management depends on how well you can anticipate future financial needs and plan for them. Today, people can expect to live 20 to 30 years in retirement. That means having a plan to have enough money to meet anticipated costs in the later years. Saving and investing are two different tools to plan for the future.

Saving
Saving is setting aside money for a rainy day or emergencies. Your main objectives are safety, accessibility and some return on your money. The money should be accessible in a few days with no penalties attached. An emergency fund is usually 2 to 6 months of take home pay. It should cover monthly expenses such as mortgage, utilities, food, etc. (refer to Making Ends Meet)

The less stable the monthly income, the larger emergency fund needed. For example, if you are an hourly worker for an electrical company, you would probably want to have a larger emergency fund than a salaried teacher. The best way to build your savings is through a systematic saving plan, like payroll deduction or check out these other savings ideas.

Investing
On the other hand, investing focuses on putting money to work to earn more money for the long haul. There are no guarantees that you will get your original investment back. For example, a stock purchased at $10 a share may increase in value to $15 per share in a week and drop in value to $5 a share the next day. The original $10 is not guaranteed so only invest what you can afford to lose without jeopardizing your financial base.

Before investing:

• Make sure the basics such as living expenses, insurance needs and a retirement plan are covered.
• Learn more about investing tools, strategies and reliable sources of investment information.
• Know your risk tolerance and investments best suited for your life phase (30's, 40's, 50's, etc.)
• Know where to go for professional help.
• Understand the pros and cons of self-investing, including investing through the internet.

What are the benefits of saving and investing?

Peace of mind. No one knows what the future holds. If an unexpected event occurs, like sickness, relocation, or job loss, savings can be a lifesaver. As people spend more years retired, it is critical to have money set aside to maintain your desired lifestyle.

Security. If your savings are in a federally insured institution, your saving is secure up to an amount specified by regulations.

Profit. Your saving and investment dollars can earn interest and increase in value.

Financial Control. Setting financial goals (like having a reserve fund) and making progress (a growing savings account) shows you can take control of your money.

"Gift" yourself or family. Saving regularly can get you that bigger "something" like a trip, digital camera, or down payment for a home.