What is really the difference between these two? They are somewhat similar but they are entirely different. Let’s find out and learn more about this!
Many new investors don’t understand that saving money and investing money are entirely different things. They have different purposes, and play different roles, in your financial strategy and your balance sheet. Making sure you are clear on this fundamental concept before you begin your journey to building wealth and finding financial independence is vital because it can save you from a lot of heartache and stress.
I’ve witnessed firsthand, and spoken with many individuals, who lost everything despite having wonderful portfolios because they didn’t appreciate the role of cash in their portfolio. Cash deserves respect. The goal of cash is not always to generate a return for you.
Perhaps the best place to start would be to spell out the differences between saving and investing for you, defining both concepts.
What Is the Definition of Saving Money?
Saving money is the process of putting cold, hard cash aside and parking it in extremely safe, and liquid (meaning they can be sold or accessed in a very short amount of time, at most a few days) securities of accounts. This can include checking accounts and savings accounts secured by the FDIC. This can include United States Treasury bills. This can include money market accounts (but not always money market funds as you need to look at the holdings and structure closely).