What's up, CreaTiffs?
Welcome to the Tiffy Show.
Today, I'm going to be talking about how investing is different than saving.
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Quick disclaimer before we get started, I am not a financial advisor.
These are just my thoughts and opinions, so take them with a grain of salt.
How is investing different than savings?
To jump into this topic, I am going to break down what savings is, and then I'm going to
go into what investing is.
And a lot of people get the two mixed up and intertwined, but they are different.
Now, with savings, it's when you are saving your money.
It's when you're putting money aside, maybe from a paycheck or a large amount of money
that you get as a gift.
And the purpose of it is a safety cushion.
It's to use at a later time.
Maybe it's for a future vacation or your future in general, a car, or just an emergency fund
in case you need it. And that is savings.
Now, with most savings, you put it in a low-risk, high annual percentage yield bank account.
There's not that many banks that give a high percentage interest rate anymore, so good
luck in finding that.
But I do find that if you go online, you can find better savings accounts to put your money
in that do have a bit of a higher interest rate if you're interested in that.
And back in the day, putting your money into a regular savings account was the way to go.
You would grow your money, the interest rates were good, and you could just leave it in there.
And the longer you left it in there, the more money you made.
But nowadays, banks don't really give as many incentives for you to put your money into
a bank account with them, other than a checking account.
And I find that, personally, there's really no difference than putting it in a piggy bank
or putting it in a shoebox under your bed.
Don't look under my bed.
There are other savings that are low-risk that you can do, which are money market accounts
or a CD, which is a certificate of deposit.
Now, a money market account is quite like a savings account, but there is a minimum,
usually, of the amount of money that you need to put into the account, and you don't have
as much freedom with withdrawal.
So, you might have a certain number of times you can withdraw a month.
Now, back in the day, money markets really competed against savings and getting you to
put your money in them.
But now, I find that the interest rate on money markets and the interest rate on savings
accounts, regular ones, is pretty equal.
No matter what happens to a financial institution that is holding your money market, if they
go under, you are still going to get your money, no matter what.
Now, a CD is a Certificate of Deposit and it is another federally-insured bank account, savings account.
The difference, though, is that you are putting a fixed amount of money in, at a fixed interest
rate, with a fixed maturity date, meaning that you can't touch it for a certain amount of time.
Now, this time is usually between three months and 10 years.
So, in that time, you can't touch it, and if you do, you're usually hit with a fee.
A CD has a maturity date, and the longer your money is in the CD, the more money you'll
make with the interest rate.
Now, remember that with the CD, you can't touch it.
If you need your money fast, if you need your money all the time, a CD is probably not the
best bet in regards to savings.
Now, let's get to investing.
Investing is when you are investing your money or saving your money in assets that you hope
will grow over time.
Investments usually include stocks, bonds, mutual funds, ETFs, and real estate.
Those are pretty much the main ones.
I won't be talking about real estate as much.
Just because it does take a lot of capital to get into real estate, but I can later down
the line, if that's something you want to do.
Because I have invested in real estate before.
You can invest your money through brokerage websites like Fidelity or Robinhood.
Those are the two I use.
If you'd like to get started with Robinhood, you can click the link down below and check it out.
It's very user-friendly if you're a beginner, I will say that.
It's super user friendly, and you can just jump right in and start investing your money.
Now, you can also use a money manager, but I feel that you are smart enough to put the
research in and grasp this.
So that you can have full control of your money and how you invest it.
With this video in investing, I'm talking about long-term investing, I'm not talking
about swing trading, day trading, anything like that.
Which I will in later videos.
This, right here, is just talking about not touching your money, letting it grow.
And then, in 10, 20 years down the line, you are going to be very, very happy when you
open that account, and you're like, "Yes, I can retire, or I can be safe, or I can go
on a trip," or whatever you want.
With investing, it's always a good idea to know that you're not going to be touching
that money for about three to five years.
If you feel like you are going to need money or you are the type of person that needs money
all the time, and as I always say, "Know yourself."
Then investing might not be the best move for you to make right now.
Remember, depending on which investment choice that you choose, it can be volatile.
I want you to know that it will take research, it will take learning, and not just jumping
in because that's where people really fall.
Is when they jump in without learning what they're doing, and just taking a guess and...
That is when it becomes a gamble.
So, with my help, I'm here to help you, I hope to give you the tools needed so that...
Or the tools that I use so that you can form a plan yourself in regards to investing.
To give you a simplified example of savings versing...versing?
(Beep) it all!
To give you a simplified version of savings versus investing, I am going to tell you using money.
If you take $2,000 and you invest it into a savings account with a 3% annual interest
rate, then in 20 years, you will have made $3,612.
Which is good.
Any money is good money.
If you took that same $2,000 and put it into a mutual fund with a 10% annual return, then
at the end 20 years, you would have $13,455.
And that is a lot more than the $3,000 something I mentioned before.
And that is pretty much in the clearest terms, the difference between saving and investing.
But remember, that the investing does take more risk, but as you can see, there's more reward.
Another thing to keep in mind is that with investing, you are pretty much beating inflation,
whereas with savings, you're not.
And that just basically means that the value of your money will decrease over time, and
putting it into an investment will make sure that it doesn't decrease as much as if you
were to put it straight into a savings.
Inflation basically means that over time, the value of currency goes down.
And what I mean by that is if you think about it, buying a Snickers bar 10 years ago might've
been a dollar, whereas buying a Snickers bar or a candy bar today might be $1.20.
Or when your grandfather says, when he bought a house, it was $25,000, and now, buying a
house is so much more.
And that, my friends, is inflation.
By investing, you're beating that whereas savings doesn't move fast enough for you to beat inflation.
Which option is best for you?
First and foremost, Know Yourself.
If you need money and you always need money for your children going to school, or to fix
the car, or you're buying a house, or any unexpected things, you always need money.
Then a savings is the best bet for you.
But if you have money that you can store away for three to five years and not touch it,
hopefully, even more years than that, then you should look into investing.
Now, I personally think that either way, whether you become a saver or an investor, I think
that you should have an emergency fund.
I'm not saying that you shouldn't have an emergency fund as an investor.
Both of them, you should have some money set aside in case (beep) happens because (beep) happens.
I am just saying that don't take all of your money and leave it in the savings.
If you have more than enough money, put some of that into investing, if you can, so that
it can grow over time at the highest rate possible.
Lastly, to make it even more simplified, when you think savings, I want you to think banks
and low risk.
And when you think investment, I want you to think everything else: stocks, bonds, mutual funds
and high risk.
And that will help you separate what the two mean.
That was generally the difference between savings and investing or investing and savings.
And I hope that it cleared up some things for you so you can figure out what you want
to do with all that money that you have stored in that piggy bank.
And if you enjoyed this video, make sure that you share it, like, subscribe, and comment.
Comment below, and let me know if you're a saver or investor, and I will see you next time.
Stay CreaTiff.