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Why you must keep your savings separate from your investments

Why you must keep your savings separate from your investments

When it comes to your finances, from your earnings you need to spend some of it to cover necessities and expenses. You can then put the money you have left into your savings and investments.

But what is the difference between your savings and investments? Are they not just the same thing?

Read on to find out…

 

 

The difference between savings and investments

Whilst savings and investments may seem similar, they’re not. The difference is that you should have savings as a safeguard. You savings is money you put away for particular purposes.

On the other hand, you invest your money because you want to grow it.

So how much should you have in savings?

How to decide how much to save

The first thing you need to have is an emergency fund in your savings. This is a lump sum of money that will cover you for at least three months if the worse happened and you lost your job.

You could also use this money for any unexpected large expenses too. Such as an expensive repair to your car or home.

You should use your savings for saving up for large items, such as a car or the deposit for a house.

Where to keep your savings

The key with your savings is they must be 100% safe. You also want to have instant access to a large portion of your funds.

You can consider different savings account with your bank.

If you have money in your savings that’s for a specific thing in the future, you could consider locking it away in a fixed deposit savings account or RSA Retail Savings Bonds. But if you need to access this money before the end of the fixed term of the savings account or your bonds mature, you’ll pay a penalty.

Savings help to give you financial security and stability over the years. And you shouldn’t risk your savings by investing it. You should apportion a set amount of your income or save money up for that purpose.

So there you have it. Why you must keep your savings separate from your investments.

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