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Saving versus investing

Saving and investing are both important components of a financial plan. Each action serves a unique purpose, depending on the needs of the individual or the family.

Establishing a savings account is an excellent way to hedge against the unexpected. Funds set aside for savings are usually for shorter-term activities – things that may occur within a 12 to 24 month period. A saver may set aside money for a wedding, a vacation, a baby, a new outfit or even equipment for a hobby. In addition, having three to six months of savings for emergencies (e.g., loss of a job or car repairs) can ease the burden of unanticipated financial events.

In contrast, investing often requires a longer-term mindset. Investing is committing money to an activity in order to earn a financial return. This may involve actions such as contributing money to a retirement or college savings account, purchasing real estate, or buying individual stocks. Although not guaranteed, investing could provide an opportunity to earn compound interest (earning interest on your interest) – and that is where the long-term vision can start to pay off.

There is no such thing as a perfect savings plan or foolproof investment strategy. Savings and investment needs will differ from person to person and from family to family. Taking the initiative to get started is the first step.

If you would like to learn more about the basics of investing, plan to join us at University of Missouri Extension’s Intro to Investing workshop on at 6 p.m., Oct. 23, in Fredericktown. Call 573-783-3303 for information.

Ashley Bales

Ashley Bales

The information provided above is for educational use only and not intended to be considered legal or financial advice.* Ashley Bales is a Family Financial Education Specialist and Accredited Financial Counselor® headquartered in Madison County.  Contact Ashley at 573-783-3303 with questions or comments. MU is an equal opportunity/ADA institution. University of Missouri Extension does not discriminate on the basis of their race, color, religion, sex, sexual orientation, national origin, age, disability in employment or in any program or activity.

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