As someone who understands the importance of planning for the future, you’ve probably had your fair share of deliberation over whether you should simply save your money in the bank or invest it in some policy that can help it grow. When it comes to their hard earned money, many people find the idea of market risks absolutely daunting and unnecessary and therefore end up opting for savings. However, just because savings may seem risk free on the surface, they may end up harming your financial goals in many ways.
While choosing between savings and investment, it is essential to consider the following factors:
Inflation essentially refers to the sustained increase that occurs in prices within an economy. It generally occurs over a period of time and the rate of inflation can fluctuate along with the economy, which means that sometimes prices can increase dramatically and sometimes they can stagnate at a comfortable level. Inflation is what determines whether your current earning power is enough to sustain a certain type of lifestyle. A salary bracket that may seem great right now might set a family back financially a few years down the line. Investing your money ensures that as your funds grow, they account for inflation. For instance, when you invest in a life insurance policy or a retirement package, the policy itself is designed in a way that ensures that the final sum should be enough to help your family sustain their lifestyle, even after prices rise a few years down the line. Conversely, when you opt to save your money in an FD and RD, you may be offered an interest rate that seems great on paper. However, ultimately, the funds that you will have at the end of the day will not be enough to cover all your needs.
2. Multiple scenario safety net vs single safety net
When you invest your funds in a high ROI policy such as a ULIP, you end up ensuring that by the end of the term period, you have grown your funds exponentially. As a result, your funds can be then used to account for multiple scenarios in your life. Whether you want to purchase a car, go on a holiday abroad, or send your child for higher education, you may end up with surplus funds and can use those for other scenarios as well. This is mainly because the return on invest with such policies is quite high. However, on the other hand, if you choose to save your funds, you cannot ensure a high enough growth to be able to use the final amount for multiple things, unless you have been investing large chunks every month for years, which might not be financially feasible at all! With that in mind, it is also essential to note that most investment policies (including the ones that promise high ROIs) do not have unaffordable premium amounts. Therefore, you do not have to cut your spending power by a great amount just to ensure a good future.
3. Protection for your family
Many investment options are designed in a way to protect your family during an unfortunate event in ways that a simple savings account just cannot hope to do. Whether you consider ULIPs, Retirement Funds, Life Insurance Plans, or even health insurance plans, these policies live up to far greater promises when it comes to securing your family’s financial future when compared with savings. Ultimately, when the future is murky, it is investments that win the fight with savings.