You Are Not Rich: Save or Invest?
(This is not a financial advice)
There is a big difference between saving and investing. The purpose of this post is to bring awareness to the subject and help you make up your mind.
Savings:
When you put money aside each time you make an earning, we call it saving. But you want to make money on your savings. The best way is lock your money in a bank for a certain number or years to get, for example 5% interest on it. Here is an example:
You have £5000 you want to put in saving with 5% yearly interest rate if you lock your savings for a number of years; it makes £50 for first year, by year five you've make couple hundreds. If you have £500, it makes you £5. If you're saving £50, then it's 5 pence first year.
So when you are not rich and have less amount to save, is it still worth to save? YES but it is never a smart idea to think that this saving will make you rich. That's not possible.
(This is not a financial advice)
So, why save? What's the point? It doesn't make you rich
The purpose of saving is having an amount put aside for a purpose. People usually save for two general purposes; a) save for the dark day and b) save to buy/invest. In brief, if you have a DIY project, fix a roof, buy a couch or go on a trip, then save for it. If you want to buy a house, probably it is better invest your money to make money.
If you want to make money out of saving, you need to save a 5 and 6 figures, but you're not rich.
When we say, save with your local credit union, we don't mean we'll make you rich. We won't. We just give you the opportunity to stable out your daily life so you can focus on your career, ambitions, future. On top of that, when you save with your local credit union, you are supporting your community because your local credit union also help the community with lending people in need. Don't worry, your money is safe.
Most not rich people don't save. Rich people do. Not because they are rich, but because it makes a difference over time. However, they also know that saving is not what makes them rich, it is investing.
(This is not a financial advice)
Investing:
That's where the confusion falls. Some people think if they save, that is an investment, they can make money. Surprise, not if you are not already rich.
Investing means taking a leap of faith and put the money into work to make more money; such as, start a business of any kind, buy stocks or shares and become a shareholder... There are many ways to invest if you have the money, but you are not rich, you don't have the money to invest.
When investing, your money is at risk. This means you could lose it, if you have a bad investment or that business loses. If you're rich, it's not a problem to lose a bit because you'll be making money on other investments. You're not rich! Think twice with that money you want to invest.
(This is not a financial advice)
You're not rich but want to invest
That is possible. Here's a scenario that might work for you because you're not rich.
Imagine you got smart and prepared a monthly budget, you discovered that you are left with £99 in your pocket that you can despair. I know you don't have it, just imagine;
Save £39 in an untouchable account, such as with your local credit union, specially if that is CLEVR Money :). Then find a great investment but researching it deeply and thoroughly; do you want to become a shareholder to a profitable company? do you want to lock the amount in investment saving which you cannot withdraw until the term of investment is completed? Whatever investment you decide on, the £60 you're investing will either make money or lose money. That is why any investment company tells you "Your capital is at risk".
Because you're not rich, you will be sad if you lost the £60 in an investment, but don't. That is what investing risk means, you can make money or lose money. You learned by then from that experience and next £60 you will invest will do better, because you know you have £39 saved aside from last month and this month you're saving another £39. Do you get it?
In 2 months, you got £78 in savings, £120 to invest, cycle goes on. Keep calculating this for another 1 year, see where you end up? Is it worth it? YES.
(This is not a financial advice)
Because your are not rich, what you should do
You should, first of all, learn when to save and when to invest. Think about your goals. What do you want to achieve in your life. What do you want to end up doing?
Once you set up a goal, time to budget and put away that little amount you want to take further to build yourself a better future.
See, work on yourself first; the money mindset you have. Learn how to budget your money properly and make space to keep that little amount you need to start changing your life. You can do both saving and investing then. It is not an overnight process, such goals can take years, you must be prepared to be patient and consistent. In other words, never give up.
That's why credit unions are here. We encourage to save with us from only £10 a month, put it aside and forget about it either via standing order, direct debit or salary deduction. As a saving member, we support you if you need a small loan here and there and yet keep saving up more. All saved money is yours and still may get paid dividends each year when the credit union have excess.
Once you are in the terms financial stability: This term means that you didn't put aside £200 and then had to pick them out to pay for that stupid broken washer. It means you can focus on the investments you're making to make more money and eventually become rich, but today, you're not.
