Saving vs Investing, Which is Better?

Are you frustrated with wanting to get started investing, but can’t figure out how to get started? It’s that time of year for my free quarterly beginner class that I host with a financial advisor! While I do host these frequently, this will be my last one for a bit since I will have my hands very full until the fall! So if you’ve wanted to take my class this is your last chance for a while! As always, this class is 100% free but capacity is limited, so make sure you secure your spot by registering today!

Did you know that if you saved $400 a week for 50 years, you would have saved $240,000! However, if you had invested it, you could have $5,586,000!!! Check out this TikTok post that talks about this concept, we’ll also get into this a good but during the free class on Monday.

There’s also something called losing purchasing power due to inflation. Things get more expensive over time, have you seen your grocery bill go up or down over these last few years? If your money isn’t growing faster than the inflation rate, your money is stretching less and less far every year.

While investing is superior when it comes to gains in the long run, saving can have its benefits too!

I do a lot of investing, but I also have nearly a dozen savings accounts. Why so many? I have high yield savings accounts with three different banks (these were all opened at different times and I just never closed them).

Also, I have different accounts for different purposes, here’s few:

• Emergency fund - this account is to help in the event my wife or I get laid off, if we have a big medical emergency, to help cover the deductible on a home insurance policy after an accident, etc. Will it cover every single emergency? No, does it give my wife peace of mind to know we have a nice chunk there if we need it? Absolutely!

• Cap Ex account - short for capital expenditures. We know something will break around the house, we have an older home, so it’s not a matter of IF it will break it’s WHEN will it break. In the last 2 months we’ve needed a new water heater, kitchen faucet, some light fixtures needed to get replaced, and we aren’t event half way through the year 😅.

• Baby G account - if you haven’t heard by now, I’m having a baby next month. We’ve been putting money into his account for months now to help with the cost of getting ready for him, medical bills, and so that when he’s born I can invest a lump sum for his school, wedding, and if he doesn’t use it before then - his retirement.

• Vacation funds - yes I save for vacations! Out of every paycheck we have some money going towards our this fund. This way, when we’re ready for a vacation, we have the money to cover it. We aren’t just going on vacation, charging all the expense to a credit card, then hoping we can payi it off when we get our statement

• Clothes fund - I call it my “Swag Fund” 😂. This is real, I was raised in an immigrant home, where new clothes only happened at the beginning of the school year. Sometimes it’s hard for me to make the decision to go get new clothes. So I set this account up, put money into it every paycheck, and I make myself use it! The money in this account is for clothes shopping 🛍️

These are just some of the savings accounts I keep. They are very different, but all have one thing in common - it’s money I MAY need in the next year. That’s the magic key when deciding to save vs invest.

A good example of this concept is saving for a down payment on a house. Let’s say I had $25,000 and I wanted to buy a house in 12 months. I put the money into the stock market, the stock market is doing great, so my $25k is now worth $35k. I’m on top of the world, I got money to close plus some extra to furnish the house!

But what if that stock market had been doing bad? So now my $25k is worth $15k (market ups and downs are totally normal something we talk about in the free beginner class Monday). I would be screwed! I need $25k to close on my house and I am short by $10k. This is not the position I want to be in…

Since I don’t have a crystal ball to see exactly what the stock market will be doing in the next year, it’s just not a good idea to invest that money into the stock market! For something like this, I would use a high yield savings account.

Quick recap, investing is far better than saving when we’re talking about gains in the long run. However, saving can be superior when we’re talking about keeping money stable and accessible in the short run. Saving definitely has its benefits, but if you’re ONLY saving you’re putting yourself in a worse and worse position due to inflation. Again, this is something we will be talking about in more detail at the class on Monday, so secure your spot here if you’re interested!

See you next week!

Neyra

(Im A CPA but not YOUR CPA)