For this week's SmartMoney Monday, we're going to discuss the differences between saving money and investing money. We've been discussing how to save money by developing a savings habit and by using tools like direct deposit to grow your savings over time. So how do you know when you've saved enough to shift some of your savings into investing?
A good way to think about it is in terms of time frame. You should use savings to purchase things that you want that are only a few years away, such as a car, a wedding, or a down payment on a house. Savings are for more near-term things while investing is for more long term items.
Investing is a great way to take care of expenses that have a much longer lead time. You invest for things like college for your kids or retirement…things that are farther off in the future. The longer amount of time you don't need the money, the more you can tolerate the risk that comes with investing and the more your investments can grow.
There are lots of great resources to learn about investing, in books, magazines or online. But sitting down and speaking with a financial advisor or wealth manager at a financial institution can also be a great place to start. The most important thing is to commit to saving right away, even a little bit every day, so you can save and invest for your important goals in life.
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