Saving money is advantageous because it provides people the opportunity to earn interest while keeping their money safe. Investing money can be risky, but it offers higher returns than bank savings accounts and can help people build wealth over the long-term, according to The Finance Base.
Savings accounts and other savings vehicles such as fixed deposit are advantageous because they provide the account holder with the opportunity to earn interest on his savings, while having little to no risk.
While the interest rates are typically low, the amount earned in interest is incentive for saving. Savings accounts and money market accounts are designed to provide the account holder with anytime access to his money.
Fixed deposits impose a penalty if the funds are withdrawn before the expiration date of the certificate, but generally have higher interest rates than savings accounts.
The advantage of investing is the opportunity it provides for building wealth over the long-term. Diversification is a risk-minimising concept that spreads money between different types of investments, which can offset losses in one investment type with gains in another.
Traditional investments include stocks, mutual funds and bonds. These are securities that are issued by companies and governmental units for the purpose of raising capital.
Real estate is another effective type of investment, as it is generally considered to be safe and conservative. Some people invest in collectible items.
Investing money in stocks, bonds and real estate, however, does come with risks and is not guaranteed a return. Because of the risks, the returns on these investments are typically higher than those on savings accounts.
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