For a while here, we have been discussing investments. While investments are good, savings are also important. It is not wise to invest long term while you are cash strapped short-term.
Savings refers to money set aside for future use rather than spending it immediately. People save for different purposes. Reasons for saving include:
- To have provisions for emergencies
- For big purchases
- To fulfil short term needs
- To accumulate capital for investment
- Difference between income and spending
Whatever the reason for saving, there are some important points to note about saving.
- Savings are very liquid and can easily be converted to cash at hand. You need discipline to avoid spending your savings on purposes other than that intended.
- While there is little risk of loss of funds in savings, there are also minimal gains. Therefore, you shouldn’t have too much money tied in savings. You can make the most of your money by investing
- Before investing long term, ensure you have adequate money saved up for emergencies (experts advise three to six months of basic expenses)
- You do not have to accumulate so much money in savings for investment. You can start investing with as low as
N5,000 - Savings should be done before spending. Intending to save after spending is most times not achievable because there is nothing left. If there is money at our disposal, opportunities to spend keep opening.
- There are bank savings account that earns interest. You can consider that option for preserving and growing your savings.
While investments help your build wealth, savings are needful for short term purposes; strike a balance between the two.
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