Most of us know how to spend the money but many do not know how to make use of money to work for them. Spending is not your only option when comes to make the smart choices about using money. You can smartly combine Savings and Investing of your money to make your money work for you and help you to generate passive cash stream to your account.
Savings Vs Investing
Saving and investing are two different things. When you save you earn interest, when you invest, your money makes money. Saving is for the short term, investing is for the long term. When you combine saving and investing, you're not only setting money aside, you're also putting your money to work for you.
You create your emergency fund through savings. This fund is important to protect you if you lose or quit your job and need time to find a new job. An emergency fund is important to save you from any financial crisis and helps you to sleep well at night because you know you are prepared for what might happen.
After protecting your short-term needs through savings, you can grow a portion of you money for long-term needs or generating a steady stream of income to improve your living style. Here's comes the important of Investing. The main purpose of investing is to use money to make more money for you. Almost all investments have certain level of risk; in general, the higher the risk, the better the potential return. It's also means that the higher the risk, the higher the potential loses. You may need to take on additional level of risk in exchange for a higher level of return than what you can earn in an ordinary savings account. That's why the combination of savings and investing are a work perfectly to make your money work for you through investing while protecting you from any financial disaster through savings.
When we talk about investing the money, commonly it means that putting your money into the money markets. Money markets are really mutual funds of cash investments like U.S Treasury bills, CDs (certificates of deposit), and cash, and are managed by professional money managers. Many investment companies that offer a money market account will waive your initial investment if you set you a regular investment plan with them such as $25 or $50 per month. You can utilize this advantage to get your money market account open and put your money to work for you.
Investing into money market get you a higher return than savings accounts, it is a good way to use your money to makes more money for you. While investing your money into the money market, you need to create your emergency fund in your savings account so that you are protected from any unexpected financial crisis.