Saving vs. Investing: Knowing the difference could pay off in the long run


Edward Jones - Chad Choate, AAMS

Posted on

Mar 11, 2024


Florida - Sarasota, Bradenton & Charlotte Counties

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Though many people use the words interchangeably, making the distinction between saving and investing could make a big difference in achieving your long-term goals. Whether it’s providing for your family, paying for your children’s education or living comfortably in retirement, investing may be the best way to get there.

Saving is simply accumulating your money in a safe place so it’s readily available when you need it. Typically, you’ll earn a low, fixed rate of return, and can quickly access the cash when you need it.

Money in a savings account may provide a cushion for emergencies and reduce the need to borrow or use credit cards. Keeping money in savings can also help fund upcoming goals, such as a vacation or buying a new car next year. But saving is not necessarily the best way to build wealth and financial security over time.

Investing, on the other hand, puts your money to work over a period of years through interest or the increased value of your investments, potentially creating more money.

Saving helps to maintain the amount of money put into an account but has little potential to generate more income.
So, even though you may already be taking the first steps
by saving, down the line, not investing some of those savings could make it much more difficult to provide for your children’s education, support your family and achieve other future goals, such as retiring comfortably.

Remember your reasons for investing. Some people may
shy away from investing, thinking it’s too risky. Although investing does pose risks, it’s important to bear in mind that not investing can also be a risk to your financial future. If your money doesn’t grow, you may face the risk of not achieving your financial goals.

Importantly, differences between saving and investing can add up over time. To illustrate, let’s assume a 7% long-term return for a balanced investment portfolio and a 3% long-term return for savings (which is generous, given today’s low interest rates).

Over a long time frame, the difference between a 7% return and a 3% return is much more than just 4%—it could be nearly $600,000. That can make a dramatic difference, for example, when you’re building a nest egg to provide income in retirement. Assuming you were to withdraw 4% of your investment balance each year

in retirement, a $410,000 nest egg would provide about $16,000 in income per year—but a $990,000 investment portfolio could provide about $40,000 per year.

The key is finding balance: having some emergency cash in savings but also investing enough to help keep you on track to reach your long-term goals. Talk to your financial advisor today for more information about incorporating investing into your financial strategy. 

Chad Choate III, AAMSTM Financial Advisor

828 3rd Ave W
Bradenton, FL 34205-8665 941-462-2445

Same contributions, different returns, different results 

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Edward Jones - Chad Choate, AAMS

Financial Advisor 828 3rd Ave. W., Bradenton, Florida, 34205

Experience and Background I am a financial advisor in Bradenton, FL, and began my career with Edward Jones in 2017. As a financial advisor, I want to find out what's important to you and help you build personalized strategies to achieve your goals. As a lifelong Manatee County resident, I graduated from the University of South Florida and was a teacher in Manatee County before joining Edward Jones. My driving force is to change people's lives in a positive way, and what better place than my home to do that. Whether you're planning for retirement, saving for college for children or grandchildren or just trying to protect the financial future of the ones you care for the most, we can work together to develop specific strategies to help you achieve your goals. We will also monitor your progress to help make sure you stay on track or determine if any adjustments need to be made. Throughout it all, we're dedicated to providing you with top-notch client service. But we're not alone. Thousands of people and advanced technology support from our office can help ensure you receive the most current and comprehensive guidance. In addition, we welcome the opportunity to work with your attorney, accountant and other trusted professionals to deliver a comprehensive strategy that leverages everyone's expertise. Working together, we can help you develop a complete, tailored strategy to help you achieve your financial goals. I currently volunteer with the Manatee Hurricane football Broadcast and Booster Club, serve on my church's trustees council and have previously served as a leader in Young Life. I am a member of the Manatee Chamber of Commerce and an alumnus of their Leadership Manatee program. I have been married to my childhood sweetheart, Ashley, for 15 years and we have a son, Wesley, and daughter, Camryn. We enjoy watching our children play their sports and traveling as a family.