Should I save or invest? This is a question most of us have asked at one point or another. There is no right or wrong answer in this case but rather the answer depends on you. By this, I mean that the answer to this question will vary depending on your goals, financial situation and your risk tolerance. Before we go into the details of which of the two options works for you, we must first differentiate these two terms “saving” and “investing”. When someone says they are saving money what they mean is that they are putting money aside, usually for a specific purpose such as your retirement, a vehicle, home, a trip, etc. Whereas investing is taking a portion of your money and attempting to make it grow by purchasing things that you believe will increase in value which you may or may not decide to sell later once its value has increased enough to make you a profit.
Regardless of whether you want to invest your money, you should always have an emergency savings account set up. As we all know the unexpected can happen to anyone at anytime so you must always be ready to deal with this unknown. The general rule is to have enough money in your emergency savings account to cover all your expenses for 3 months. Once you have this set up then you can decide if you want to save for something else, invest or do both. One thing to note is that there is never any harm in saving unless you have debts to pay. If you have a lot of debts it’s a good idea to first pay these off and then focus on saving. This will allow you to save more money regularly because you are not paying off debts.
There is much to be said about investing and the different types of investing but, for the sake of our purpose, we will just cover the basics. It’s a good idea to invest but investing is not meant for everyone because it requires you to be patient and willing to lose money. Most people that invest usually do so with money that they can afford to lose. If you are the type of person who wants to invest but do not want to risk losing some or all your money then you can look into Guaranteed Investment Certificates (GIC). With a GIC the principal amount (maximum of $100,000) is not at risk unless the bank defaults. There are many different types of things you can invest in but before committing to any I suggest meeting with a financial advisor who can review your finances and suggest the types of investments that would suit your goals.
Once you have your emergency savings account set up then you can decide based on your monthly income if you can afford to save, invest or do both. A good rule to follow is that if you can spare at least 10% of your income then put this amount in a savings account regularly and if you can spare another 5% or more after covering all your expenses then invest this amount. Slowly but surely your investment portfolio will grow, you might start off by investing in small things but eventually if you are consistent you will investment in things with higher risk but also higher reward. To go back to the original question (whether you should invest or not?) take the time to review your finances, consult a professional if you have to and decide what works for you.