It involves setting aside a part of your profits or income for future use including emergencies.
The term 'saving or savings' is not new to a majority of people, even very little children who are just old enough to understand ownership of properties and money understand the concept of saving. You would see a young teenager saving his/her gifted money to be able to buy the item they desired. You can testify to this. Isn't that?
The Importance of SavingOne of my previous articles on budgeting emphasized largely the contribution of savings in an adequate budget.
Savings is rightly described as the reservoir of wealth especially for times when money may not be so available. It makes a very important aspect of the budget of any income earner and its importance cannot be overemphasized. However, in hardened economies and hard-earning workers, there may not be as much for savings. Before I will give you reasons why savings may not be the best option, you need to know that it may be important to save in certain conditions. But your entire profit or "left-overs" must not be committed to savings alone. Saving, in this case, is disastrous and will only lead to compulsive consumption of the money you planned never to use.
Is There Really a Need To SaveFrankly speaking, there is no need to save. I don't mean literally that you shouldn't save but I mean there is a better way. This is by investing a part of your income into something that can also bring in returns. You would still keep the part meant for the rainy days anyway. But you should remember that also has its own major demerits.
In just saving, you simply store money for future use. This idea may look interesting but it is fraught with many shortcomings.
Shortcomings Of The Conventional Saving and Why Invest InsteadAs good as it may seem at the end of the saving period, you may end up having a lower value for the money you saved especially in the dwindling economies that prevail in many countries. Prices of things are also changing, most often to the increase. That means the purchasing power of the money you saved consequently dropped. In contrast, when you invest, at the end of the period of investment, the worth of your invested input rises. During the period of investment, your cash was not fixed. It was dynamic. So that the changing economic forces could not deplete its worth. That is why business professionals would rather invest than just save.
Ways To Invest?There are many things you can invest in. The basic principle of investing involves putting up your resources into an activity that will yield greater gains at the end of the day. The list of things you can invest in is inexhaustible and it's not within the scope of this post to begin to list them. However, you must understand that investing in anything that you consider profitable at the end of the stipulated period requires careful planning and risk-taking. I just mentioned that there are risks associated with investment and there are times when risks will catch up on you. But with perseverance and resilience, it all ends up without any regrets.
How to Handle Risks While InvestingScaring away from risks does more harm than good. For any activity that will be profitable both in the short term and in the long term, you must be ready and willing to take the risks that may arise. Risks are part of the process of anything that will be beneficial. Therefore, there is a need to learn how to handle them, especially now that you are planning to invest with your supposed savings.
If you ask me about how to handle risks while investing, I would say that there is no hard and fast rule to this. The many investors that have succeeded in their investments have one thing in common. They were ready and willing to take risks
Scaring away from risk-taking is the first step to not succeeding.
Why People Fear To InvestMany people are afraid to invest and there is no argument against that. Some of the factors that create this fear may include:
1. Inadequate knowledge of investment ideas.
You probably think you do not have what it takes to start up a profitable investment. But that may not be entirely true. The key to succeeding is to look within you and try to fill a vacuum in society by meeting a need. That is to say, you need to find a societal need you can satisfy economically. That's business.
2. Lack of knowledge of the available types of investment.The most readily available and common investment especially in developing economies are small or large scale sole proprietorship businesses. These are generally easy to start up and maintain. Lack of ideas on an area to invest in has led many would-be investors to keep "saving away" their money.
Areas like education, real estate and mortgage, shares buying, etc are still available investment options. However, the choice of the investor will depend on how much the investor is willing to make available for investment, and on the feasibility of the investment option to that investor.
There are yet other factors that may impede people's decision to invest but I will leave it at these two in this post.
Investing Remains the Best Way of Saving
Like I talked about in the shortcomings of savings above, investing remain the best form of saving. This is both an experiential and analytical study. That is, I've not only experienced it personally. I have also studied about it from external sources and other people.
If you have not experienced how saving can be so disastrous, then I say that you have never saved before. But if you have experienced that, may this post remind you to save the better way every other time. By investing, you save better.
Be Prepared and Accountable
The first is that you have everything it takes to succeed already.
Second, you discover that there may be some few areas you need to work on, some attitudes to modify and some attributes to acquire.
Accountability is a necessary tool in investment. You must be financially accountable even if it is your own money. Many people become careless with their profits because there is not one to account them to but themselves only. This freedom is good but you should never abuse it by assuming that you cannot be accountable to yourself.
Are you ready to begin? First, be bold to take the risk, then prepare for the task, and then, kick into investing and see how better to save.