Wojciech
Diploma for Financial Advisers
Diploma in Accounting
Member of London Institute of Banking and Finance
When managing your money, it’s easy to feel overwhelmed. You might be asking yourself, “Should I start saving or investing first?” The answer depends on your financial situation, goals, and how much risk you’re comfortable with. Let’s break it down into simple steps so you can decide what works best for you.
Why Saving Comes First
Saving is the foundation of good financial planning. It means putting money aside in a safe place, like a savings account, where it’s easy to access. Saving should usually come before investing because it builds a financial safety net for unexpected expenses. This is called an emergency fund, and it’s a must-have.
How much should I save?
- Aim for 3 to 6 months of essential living expenses.
- Keep this money in a savings account or an easy-access cash ISA.
Saving is also ideal for short-term goals like a holiday, a car, or home repairs. Since savings accounts don’t carry risk, your money is protected and ready when you need it.
When to Start Investing
Once you’ve built your emergency fund and met your short-term savings goals, you can consider investing. Investing is a way to grow your money over the long term by putting it into assets like stocks, bonds, or funds. Unlike saving, investing involves risk, but it also offers the potential for higher returns.
Investing is a smart choice if:
- You have money you won’t need for at least 5-10 years.
- You’re willing to accept some ups and downs in the value of your investments.
- You’ve already paid off high-interest debt like credit cards.
Investments work best for long-term goals such as retirement, buying a home, or building wealth for the future.
How to Decide
To answer “Should I start saving or investing first?” consider these key points:
- Do you have an emergency fund?
- If not, focus on saving first.
- Are you financially stable?
- Make sure you can cover monthly bills and have no high-interest debt.
- What are your goals?
- For short-term goals (less than 5 years), stick with saving.
- For long-term goals (5+ years), investing might be a better option.
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A Simple Plan to Get Started
- Save First: Open a savings account and set up a direct debit to transfer money regularly. Start small if you need to—consistency is key.
- Invest When Ready: Research investment platforms or speak to a financial expert to explore options like stocks and shares ISAs.
- Stay Balanced: Even when you start investing, continue saving for emergencies and short-term goals.
Final Thoughts
The question “Should I start saving or investing first?” doesn’t have a one-size-fits-all answer. It depends on where you are in your financial journey. If you’re just starting, focus on saving. Once your savings are solid, you can explore investing to grow your wealth over time.
Remember, small steps lead to big changes. Whether you save or invest, the important thing is to start today.
Looking for guidance?
If you’re unsure about saving or investing, I can help! Book a session with me to get clear, practical advice tailored to your situation.
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