While both are good financial habits that build long-term wealth, it is critical to understand what is the difference. Only then will you be able to create a financial plan that works best for your goals. The phrase \u2018good financial habits\u2019 umbrellas both savings and investments because they both contribute to your net worth. But reality check, savings and investments are two distinct actions and they have dramatically different impacts on your finances. So, let\u2019s explore these differences. <\/p>\n\n\n\n
Savings is low-risk and investment is not. Investments on the other hand come with a certain amount of risk that might cause you to lose your funds. Some more than others. However, if you are comfortable with the risks you are taking, then all\u2019s well that ends well!<\/p>\n\n\n\n
With investments, there is also the risk of losing your money. What you lose or gain solely depends on your investment. But there\u2019s no guarantee that you won\u2019t lose money from your savings account, chances are relatively low\u2014so if you want to ensure that your chances boil down to zero, then before opening a savings account, confirm that it is FDIC insured.<\/p>\n\n\n\n
A savings account will have a fixed interest that you will earn on the funds. In cases like this, a high-yield savings account<\/a> will help you tap into the best APY<\/a>s available. With Investments, interest rates vary from collateral to collateral, risky investments pay more than <\/p>\n\n\n\n You may also like: 7 differences between savings and investments<\/a><\/p>\n\n\n\n The amount of return you get differs between savings and investments. Savings are low risk and they come with low returns. Don\u2019t presume to think that the past performance of certain investment collaterals guarantees future success. <\/p>\n\n\n\n Investments can fluctuate in value and volatility tied up in this investment choice. We\u2019ll be honest there are investments with less volatility involved, the returns are never guaranteed. So, you could lose money or win something big along the way.<\/p>\n\n\n\n You may also like : A beginner\u2019s guide to Exchange Traded Funds<\/a><\/p>\n\n\n\n Talk about savings and you can tap into your funds anytime you need them. Regulation D says you can make up to 6 withdrawals from your savings account through each investment cycle. But investments come with lock-in periods. And you may just not have access to the funds when you need them\u2014accessibility is granted once it hits maturity. <\/p>\n\n\n\n But FYI, this quick access into your savings will act as a double-edged sword because you might just dip into savings when you shouldn’t and when you don\u2019t need it!<\/p>\n\n\n\nHigher Risk Higher The Returns<\/h2>\n\n\n\n
Access Granted or Denied?<\/h2>\n\n\n\n