Considering the economic climate today, saving money is not enough to be financially secured. Saving alone can derail one’s financial goal. The right way to keep up with the changing times and future needs is to save and grow money through investments.

Saving and investing money are often used interchangeably. Both ways are equally important in implementing financial plan that involve putting money away for future use, but these two have actually big difference and one should complement the other to secure one’s financial future.

Saving is putting money aside, for instance, in saving and checking accounts that can be easily accessed for emergencies or future purchase. Investing, on the other hand, is the purchase of assets such as stocks, bonds, mutual funds or real estate that offers potential profitable returns as interest, income or appreciation in value.

According to MoneySmart, a personal finance portal in the Southeast Asia, saving and investing can be differentiated by looking at what kind of goal an individual wants to achieve. It said that saving is important when you want to achieve short-term goals while investing is essential for long-term goals.

“When you have a short-term goal in mind, by all means save for it. For instance, if you want to buy the iPhone X in six months’ time, the only sane way to do so would be to put the money till you have enough, then buy it,” MoneySmart said. “Generally, any goal that’s less than five years away can be considered a short-term one. So whether you’re planning to go on a round-the-world trip in a years’ time or buy a new washing machine, stashing the cash in your bank account is fine.”

On the other hand, when it comes to long-term goals, saving money isn’t going to cut it because of inflation. Inflation is the reason why everything just keeps getting more and more expensive over time, the MoneySmart said. “What this means is that the value of your savings falls over time. In order to ensure your money doesn’t become worthless five, 10, 20 or 30 years down the road, you need to invest it so it can grow at a rate that hopefully keeps up with or exceeds the inflation rate,” MoneySmart explained.

Alfred A. Edmond, Jr., an expert on business and economic trends and personal finance, has the same point of view. He once said in American Urban Radio Networks’ radio feature “Money Matters” that individuals cannot gain long-term financial security without including investing as part of their financial plan.

“Cost cutting, controlling debt and building up your savings are all important. But unless you invest, especially for your retirement, you simply won’t be able to accumulate enough wealth to keep up with inflation, health care and other costs, even as your income declines or becomes fixed at a certain level,” Mr. Edmond explained.

For Robert T. Kiyosaki, a business guru and the author of the popular personal finance book Rich Dad Poor Dad, saving money means losing money, and the key to a secured financial future is investing.

In richdad.com, Mr. Kiyosaki shared that aside from inflation, taxes and avoiding risks are the other forces that steal the wealth of someone who relies on savings.

He explained that people who work hard and save money are having a hard time building wealth because they pay more in taxes. In particular, the government taxed savers in the form of income tax, capital gains tax, sales tax, and estate tax.

“So if you’re a saver, you’re a loser because of taxes,” Mr. Kiyosaki said.

Working hard to save money comes with placing “security” in those savings. It becomes very hard for savers to branch out and invest it for fear that all their hard-earned money will be lost.

“Rather than take a perceived risk to grow their money exponentially through investing, most people take the ‘safe’ route of saving their money because it is what they know and understand,” Mr. Kiyosaki said.

“Saving is not safe. In fact, it often is the riskiest way to use your money because of taxes and investing,” he added.

Knowing how to secure financial well-being is one of the most important things every individual needs to learn. It is extremely important to save money but it needs to be done the right way, and it is through investing these savings in the market. Investments do not always guarantee good returns, but getting the right facts about saving and investing could help to gain financial security over the years. — Mark Louis F. Ferrolino

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