Having a good habit of saving and investing is vital to financial growth. However, understanding when to prioritize one over the other is key to achieving your financial goals. Let’s take both, one at a time.

What is saving?

Saving entails keeping money for future (short-term) use. Keeping cash is good only in the short term because inflation (rising prices) reduces the value of your money over time.

When should I save?

You can choose to save if you tick the boxes below:

1. When you need the money within 5 years to cater to short-term goals like a holiday, wedding, or even a car purchase
2. Emergency fund – when you want to keep cash aside for the rainy days or as we usually say, ‘just in case.”
3. Liquid cash: Money you want to be able to access anytime.

Investing means buying assets with the aim that the value will appreciate over time and earn you a profit greater than your initial investment. Although investing involves risk, having a good investment portfolio of stocks, bonds, real estate, etc. can help protect the value of your money against inflation in the long term

When should I invest?

1. When you can accept a certain amount of risk and won’t need the money for at least five years. With investing, there is no assurance that you will make money and you can earn back less than you put in.
2. When you want to increase your financial growth potential beyond what savings or cash can provide.
3. Once you have an emergency fund you can access quickly- a reasonable rule of thumb is to have about six months’ worth of expenses saved up.

In summary, choosing whether to prioritize investing or saving depends on your current situation, financial goals, and time horizon. If you have long-term goals and need to start investing now, click here to get professional support.