Savings is One Source of Funds for Your Investments
Saving and investing are different, although savings are often the source of funds for investing. Savings are a percentage of your income that you put aside regularly, usually at a low interest rate. Normally saving accounts have a very low interest rate under 2%. You can easily access savings, and often theyre insured by a financial institution. Some saving plans do have penalties, so read your account rules before withdrawing funds.
Investment funds are the funds that you dont have earmarked for the rent, groceries, taxes, and so on. They may earn interest or dividends, but you have no guarantee of increased value or future income. (Investment funds should be free of any obligations. First rule in investing is never invest money you cannot afford to lose.)
The beginning of personal wealth is the accumulation of capital that you can use for investing. This capital often begins with savings and expands into other types of more profitable investments. Savings are the beginning of your capital accumulation. Families need a regular savings program thats between 5 and 10 percent of net pay per month. Some people even manage to put away 15 percent. Saving money monthly should be a habit and regularly expected monthly.
Additionally, individuals and families need emergency funds. Folks with fluctuating income, few job benefits, and little job security may need to have a larger emergency fund. Families with two wage earners may need a smaller emergency fund. Always have some type of backup planned for future problems. While having money in investments can be great, pulling money out of an investment can take time or may not be possible for months.
A general rule is to have three to six months of take-home pay in a savings account (or a near-cash account similar to a market fund with check-writing privileges) for emergencies. If you dont have an emergency fund, you need to increase your savings. Payroll deduction plans that divert funds into a savings account or money market fund are often the most painless way to achieve the best results. On the other hand, if youve been saving a surplus, you may want to consider using these funds for investing.
Learning how to invest and finding funds for your investments is a challenge everyone struggles with daily. As always keep in mind that building up your investment empire takes time and knowledge. All investments involve some kind of risk, keep that in mind and know what the risks are before you invest. - 23305
Investment funds are the funds that you dont have earmarked for the rent, groceries, taxes, and so on. They may earn interest or dividends, but you have no guarantee of increased value or future income. (Investment funds should be free of any obligations. First rule in investing is never invest money you cannot afford to lose.)
The beginning of personal wealth is the accumulation of capital that you can use for investing. This capital often begins with savings and expands into other types of more profitable investments. Savings are the beginning of your capital accumulation. Families need a regular savings program thats between 5 and 10 percent of net pay per month. Some people even manage to put away 15 percent. Saving money monthly should be a habit and regularly expected monthly.
Additionally, individuals and families need emergency funds. Folks with fluctuating income, few job benefits, and little job security may need to have a larger emergency fund. Families with two wage earners may need a smaller emergency fund. Always have some type of backup planned for future problems. While having money in investments can be great, pulling money out of an investment can take time or may not be possible for months.
A general rule is to have three to six months of take-home pay in a savings account (or a near-cash account similar to a market fund with check-writing privileges) for emergencies. If you dont have an emergency fund, you need to increase your savings. Payroll deduction plans that divert funds into a savings account or money market fund are often the most painless way to achieve the best results. On the other hand, if youve been saving a surplus, you may want to consider using these funds for investing.
Learning how to invest and finding funds for your investments is a challenge everyone struggles with daily. As always keep in mind that building up your investment empire takes time and knowledge. All investments involve some kind of risk, keep that in mind and know what the risks are before you invest. - 23305
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