Level-up: Savings vs. Investing

Do you ever hear people talk about the money they keep “under their mattress” and think to yourself “ya me too”? Then we need to talk. This might be uncomfortable, like when your dad sat you down to give you the birds and the bees talk (never happened with me, the internet raised me), but it’s time you learned about the difference between saving and investing.

Knowing about the benefits and features of both is key to making sure you become a financial hero to your future self. So, strap in, strap on (whoa), and get ready to hang on every word I say like I’m the Lisan al Gaib. 

Lead me to the promised land. 

You got it. 

Saving is easy, it’s putting your money in a safe place, like your bank account, not under your crusty, caved-in mattress you’ve had since first-year uni (shout-out to my old roommate). Money in a savings account isn’t going to do much at all. It might grow a little bit with some small bank interest, but it’s not going to go down either. Saving cash is good for short-term expenses and emergency money. 

Investing, on the other hand, is where you’re money can really grow. It’s putting your money in stocks, bonds, real estate, dogwifhat (not financial advice), or whatever, with the hope/prayer/expectation that it will grow over time. It’s more risky, of course, which is why investing should be for more long-term goals, where you have the time to wait out potential ups and downs of the market. 

But why should I risk my precious cash?

Easy, Gollum. 

Investing is worth the risk because, let’s face it, we all want a financial glow-up. Sure, saving is good for some stability and taking care of short-term needs, but investing helps you stack even more “precious” cash. Imagine that, Smegol!

Aside from growing the pot, there’s another couple reasons why investing is important:

• Protect against inflation: this is where investing really has saving beat. Inflation is the villanous reason why a house in Manhattan cost $9,000 in 1924 and $9,000,000. This is a whole other topic we’ll need to dive into, but what you need to know is that a dollar one hundred years ago can get you way more than it does today. Investing helps protect against this robbery by growing your cash faster than inflation. 

• Get to your goals faster: Since investing gives you potentially higher returns, you can achieve your goals potentially faster. What’s your goal? A new house? A Porsche 911? The approval of your parents? Investing can only help with two of those, sorry! 

There must be a catch, there’s always a catch. 

Of course there’s a catch. It’s not the deadliest catch, usually, but there is. 

• Volatility: higher potential reward means higher potential risk. It can take a strong stomach to whether the ups and downs of the market. Sometimes I look at my portfolio and sort of cry/vomit on my phone. Other days I laugh/cry. It’s a roller coaster when you’re invested in dogwifhat (not financial advice!!).

• Complexity: The world of investing is diverse and changing all the time. New companies, new asset classes, new opportunities come about every day. Keeping up is tough!

• Emotionality: Remember what I said about the laugh/cry/vomit loop? The more you seek returns, the more risk you’ll have, the more you’ll need to have a defibrillator on hand.

  

I am enlightened

Glad to hear it! Bow to me. 

Saving and investing both have their place on your financial to-do list. Saving is good for the short-term stuff and to give you some stability. Investing is good for long-term goals and to protect you against inflation. Just remember, don’t take on more risk than you can stomach, otherwise, you’ll get into one of those laugh/cry/vomit loops I mentioned, reminiscent of that one scene in Team America: World Police. 

Bonus!

Skim: Saving vs. Investing: How are they different and which is better?
Go-on: Saving vs. Investing
Deep dive: Saving and Investing