Trading vs Saving – Which is Best for You?

Warren Buffet famously said, “Don’t save what is left after spending, but spend what is left after saving.” The American business tycoon and investor is worth more than …

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Warren Buffet famously said, “Don’t save what is left after spending, but spend what is left after saving.” The American business tycoon and investor is worth more than $109 billion, so it may be worth heeding his advice when it comes to money. If you want to build up some wealth so that you can enjoy your retirement, saving or investing a healthy portion of your salary each month is imperative. There are numerous ways to do this, and each has its pros and cons. Two of the most common ways to build up wealth are trading in stocks or saving in high-interest accounts.

The Importance of Setting Money Aside

There are so many reasons why everyone should be saving money rather than living a hand-to-mouth existence. No matter how much you earn from your job, at least 20 per cent of it should be allocated towards building for the future. You may need money for an emergency at some point in your life, and it would be helpful to have a rainy day fund set up. If this doesn’t happen, you’ll have more money in your retirement fund.

With inflation and compounding interest, money can stretch much further over time and be worth more later on down the line. Sometimes, having enough money to save each month can come down to a few small sacrifices. If you decide not to buy a coffee or a bottle of wine here and there, you should be able to save what you need to have an enjoyable life in your twilight years.

Trading Comes With Some Risks

 

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Many would say that trading stocks is the best way to invest your money and have it work for you. There is the potential to make gains from the stock market if you know what to do and if you jump on shares at the right time. The options here are to learn how to invest yourself, or hire an expert stock broker to do it for you. The latter would take a significant cut, but there would be less risk involved as they are experts in the field.

Trading stocks on your own is comparable to gambling at a casino, and some of the same techniques can be applied in both places. First of all, you should eye up the safest stock markets to invest in. These would be ones in your country of residence that use your currency. Similarly, when online gambling, players need to look for the most trusted sites available. Information is given about what payment methods they accept, and whether they have reliable pay-out rates on the games. Another commonality between the two fields is bankroll management. Investors and casino players both have to set themselves a budget before starting. They need to know when to walk away as well.

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Saving is a Long-Haul Game

For those who don’t want to run the risk of losing anything, saving in a high-interest bank account is the best option. Money saving experts like Martin Lewis and David Bach recommend setting money aside each month in a savings account that has compound interest. This means that you can make interest on the money you save, along with the interest you’d previously accrued. Over the course of ten years of saving, the results may not look that astonishing. But someone who begins saving in their twenties until retirement can end up with more than $1 million by putting away around $500 per month.

Financial advisors recommend the concept of paying yourself first when it comes to this type of saving. You need to set up automatic payments from your checking account that leave as soon as you get paid. This way, you only see the money that you have available to spend. Bach also talks about the “latte factor,” and how skipping the daily Starbucks trip can be enough to become a millionaire later in life.

Trading and saving both have their benefits. Trading would be the better option for people who want to make more money in a shorter space of time, but it does come with risks. Saving is pretty much risk free, but the best results are only seen after a long period of time.

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