which is better and how do you decide where to put your money

To save or invest – which is better and how do you decide where to put your money?

In the pursuit of achieving your financial goals, it’s important to pause and consider whether now is a good time to save your money or invest it in your portfolio. Once upon a time, $1,000 was enough to get started in the stock market. If you didn’t have that much set aside, the obvious alternative was to continue saving your money. Today, asking yourself the question of whether it’s better for me to save my money or invest it is a little more complicated. So, in this article, we’ll be exploring that question thoroughly. 

Here’s how you can decide whether it’s time to save or invest: 

Saving vs. investing: Which is better? 

Saving and investing are typically lumped together as the sole alternative to spending your money, but each strategy has its own advantages and disadvantages.

Generally, you should save to preserve your money and invest when you want to grow your money. Depending on your specific goals and when you want to reach them, you may choose to do both.

Jason Hare is the founder and Certified Financial Planner of Cornerstone Wealth and has more than two decades of experience in the wealth management industry.  Commenting on the topic, Jason Hare adds, “Deciding when you save or invest your money is essential, and you should prioritize determining when you’ll need the funds.”

When it’s important to save

Saving money is best when you have immediate or close-term expenses that your monthly income can’t cover on top of your usual spending. It can take time to build up savings for specific expenses, but doing so means you can avoid taking on interest debt because there’s a guaranteed spot to pull cash from. 

Here are a few reasons to save money: 

  • Unexpected emergencies.
  • A home or car down payment.
  • Travel Spending.
  • Homeownership expenses.
  • Medical/veterinary emergencies

When it’s important to invest

For financial goals that are three to five years in the future, the benefits of investing can outweigh the risks. 

When setting money aside, there is a greater likelihood that if an investment’s value decreases, there’s still time to recover an investment loss. 

“These are some important factors to consider when you decide to start investing. However, if you’re not sure how to get started or need guidance, it could be helpful to meet with a financial planner,” adds Hare. 

Here are situations when it makes more sense to invest your money:

  • Securing your retirement
  • To build generational wealth for your family
  • To generate additional income
  • You have excess cash

How to start investing

Certain investment vehicles will be better suited to specific situations. Determining where to invest can be a big decision, especially for those with little to no investment experience. 

For Canadians considering whether to invest or save their money, consider seeing Canada.ca for more relevant information about saving or investing. There is plenty of information available on the site, including how to develop a budget and various tax laws. 

Whether you’re planning for a big vacation or want to determine the lifestyle of your retirement, you have decades of savings and investing ahead of you. What’s important is you map out your long and short-term goals and work to have a proper financial plan set out for your future. Consider some of the resources we provided and more if to continue on the path to financial security.