Whether saving for your first home or planning for retirement, saving and investing represent the cornerstones of financial planning and security. While both exist to help build a stable financial foundation for your family’s future, they also provide a way to save for a rainy day and meet unforeseen expenses.
Take some time to think about your goals when it comes to choosing savings and investment options for your hard earned money. Ensuring you have a good mix of savings and investments stems from evaluating your financial health, planning for the future and having the discipline to make it all happen. Write down your goals and evaluate your needs. Plan to save for purchases and extras, such as a down payment on a home, vacation or new furniture. Seek out investment options for long-term planning needs such as retirement.
When saving, evaluate several low-risk options that will still provide you a return on your money. This will allow you to maintain liquidity to some extent in case of an emergency. Options for saving include placing your money in an interest-bearing savings or checking account and investing in certificates of deposit, money market accounts and savings bonds.
Certificates of deposit and savings bonds allow you to invest your money for a specified period of time, typically six months or more, while earning interest. With money market accounts, investors maintain a minimum balance while earning interest based on market rates. Money market accounts also provide access to your money with limited check writing privileges and transfers allowed. Explore your options for savings with a personal banker or financial sales professional.
Investment options, such as stocks, bonds and mutual funds, typically carry a higher risk than savings options. Corporations offer stocks and bonds as a way to finance operations and invest in expansion and growth opportunities. For the investor, stocks and bonds have the potential for great reward if the company remains profitable and continues to outperform the marketplace. However, corporations can also fall victim to the marketplace resulting in a loss of confidence and thus a loss in the value of stock issued by the corporation. Mutual funds, in contrast, represent a group of stocks and/or bonds chosen by professional investment advisors. Mutual fund shares increase or decrease in value in relation to how well all the individual stocks or bonds perform.
Evaluate your ability to handle risk before deciding on which way to save and invest. Strike a balance between savings and investments that will help meet your goals, now and in the future. Check the return rate, verify if the rate is guaranteed and ask about penalties associated with withdrawing the funds before maturity when choosing a savings product. Consider the tax consequences associated with cashing in investment options. Look for ways to increase the amount of money you put towards savings and investments. Cut back on unnecessary expenses and consider having a set amount of money automatically deposited into a savings account from each paycheck.
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