What is saving and investing?
Saving refers to when an individual sets aside money for a later date in time. Savings accounts held by financial institutions, such as banks, typically allow you to earn money on your money through interest.
Investing is similar to saving in that you are putting money away for future use. The primary difference between saving accounts and investment accounts is that investment accounts typically yield more return than a regular savings account. However, to get that higher return there is typically more risk involved. For more detailed information about investment accounts, see the various account types to the left.
Why is saving important?
Because we don't know for certain what will happen in the future, money should be put away for unexpected events and emergencies. You may need to make costly repairs to your vehicle, have a leak in your house, or need to go to the hospital without warning. These unexpected life events can turn into heavy financial burdens if money is not saved. Savings allows you to become financially secure so as not to be thrown off by life's unexpectedness.
Saving can also be used to purchase expensive items that you may not be able to afford right away. Rather than charge a new laptop to a credit card, setting aside money over time will allow you to make a purchase without incurring debt.
Using higher yield investment accounts for long term use, such as retirement is very important. At a young age it's easy to put off thinking about retirements, however the early you start the more money you will have in the future.
How much should I save?
A good saving goal is to be saving at least 10-20% of your net income. Many financial advisors recommend saving six months worth of expenses in order to be financially secure. While 10-20% is recommended, whatever you set aside is a good start. Your goal should be to be to pay yourself first, by including saving as a category in your monthly budget.
How should I start saving?
While throwing spare change into a jar, or putting a dollar a day in a coffee can is good for short-term savings, banks and other financial institutions offer easy and secure services to assist you with saving money that will benefit you in the long-term. Do a little research to see what type of accounts are most in-line with achieving your financial goals. Most financial institutions have advisors available at no cost to answer your questions and point you in the right direction.