What is Saving?

Saving is the means of putting capital aside for later use while investing is the process of deploying that capital in the hopes of making a profit/return on said capital. Saving money has no inherent risk, it is just for the process of putting aside money, regardless of what it's used for. Investing, on the other hand, has some associated risks and can have both downsides and upsides. The upsides and downsides being that you can lose money. With savings there is no potential loss or gain of capital, on the other hand there is some with investing.

What is Investing?

Saving and investing are both complimentary to each other, investing is dependent on savings, since you technically cannot invest if you have nothing saved. It's always important to consider financial goals, time horizons and risk tolerance. When investing, it's important to consider the goal of your potential investments, is it simply for a return, or for retirement? These things well weigh heavily on your allocation and risk preferences. It's also important to consider your age and when you plan to retire, as you near retirement you will want an inherently more risk averse profile.

Common Misconceptions

Saving isn't easy! In an economic climate where the basic cost of living has increased dramatically (we are talking about basic life necessities NOT just luxury goods), it's gotten harder and harder to save money. Families and young investors looking to save should be mindful that they should start early and look towards investing while they are young. Another misconception is that you don't have to be a financial genius to start investing, the S&P can outperform most financial advisors over the long term.

One Without the Other

You cannot invest without savings so you definitely want to allocate to savings whenever and however possible. However, this isn't always feasible for all families and younger adults, so take small baby steps and start from there. As long as you are putting something away towards retirement, even if it’s a small amount you are on the right path. Establishing a sizeable retirement account takes time and the effects of compounding over many years is what will help lead to a desirable outcome not an overnight mindset.