When to Save Your Money vs. When to Invest

When to Save Your Money vs. When to Invest

Stephanie Colestock |Aug 8, 2019

Should You Focus More on Saving or Investing?

At their core, the practices of saving and investing are essentially the same. Both are methods of tucking away funds for your future, ideally after allowing that money to sit and grow in whichever account it’s held.

If you look below the surface, though, you see that there are some very key differences between saving and investing.

What Is Saving?

To save money is to store is somewhere safe, to prevent it from being spent or wasted over time.

There are many intended purposes for your savings. In fact, it’s actually recommended that you have more than one form of savings and even multiple account types.

Savings accounts can be both short-term and long-term. For instance, you might be saving for the down payment on your next new car, which you don’t plan to buy for a couple of years. At the same time, you may also have an emergency fund that is easily accessible, in case something comes up next week, next month or next year.

There are many ways to save your money, too, which don’t fall into the realm of “investing.” The most common is probably your everyday savings account. Offered by brick-and-mortar and online banks alike, savings accounts provide you with a safe place to store funds until they are needed. Plus, by keeping this money out of your checking account, you remove some of the temptation to spend it.

You could also choose savings vehicles such as certificates of deposit (CDs), money market accounts, treasury bills and bonds.


The level of growth that you’ll recognize from your savings depends on the account type and establishment that you choose.

Typically, you’ll find much higher interest rates offered by online banks than by brick-and-mortar institutions. Some banks will offer both traditional savings accounts and high-yield savings; as you’d probably expect, the latter will result in a higher return. Some may additionally offer money market accounts (MMAs), which typically have rates that compare to — or exceed — those offered by high-yield savings.

If you’re alright with locking your money away for a longer period of time, CDs can be a great option. In exchange for agreeing not to touch your money for a specified timeframe, banks will give you an even higher return on the funds.

While CDs are usually your best bet for maximizing interest earned, there is one important thing to remember: the liquidity of your funds.


Savings accounts are excellent for funds that you may need to pull from at a moment’s notice. If your car breaks down unexpectedly tomorrow, you’ll want to be able to access the cash required for a repair; being able to immediately withdraw from savings is important.

This makes savings accounts and MMAs the right choice for your liquid funds — or easily accessible savings that can be quickly converted to cash.

What Is Investing?

By definition, investing is the practice of saving in growth-optimized vehicles with the expectation of growth from your savings. Essentially, you expect that money to be profitable (or generate an income) over time.

Investments can be anything from stocks and bonds to mutual funds, index funds, ETFs, options, cryptocurrency and more. You can also invest in tangible items, such as real estate or gold.

You can utilize investments as a way of saving for the future (such as retirement or education savings) or generate a profit to increase cash flow.


On average, investments will see greater growth than your typical savings vehicles. The actual level of growth, however, depends on many factors: the economy, time, the nature of the investment and even your risk tolerance.

There is a direct correlation between risk and growth: the higher the risk you’re willing to take on with your investments, the higher the return is, typically. For instance, bonds and mutual funds are safer bets and usually offer modest returns, while playing the stock market has the potential to skyrocket your growth. Of course, you also run the risk of losing it all.

Compound interest will play a large role in the growth of your investment(s). The longer you hold your investment, the more it will grow exponentially.

Saving vs. Investing: What’s the Difference?

As you can see, savings and investments are very similar in many ways. The key difference, however, lies in the point of each.

Savings are funds earmarked for specific purposes down the line or as a safety net. To maximize these, you should choose savings vehicles that result in a modest return while still ensuring liquidity of your funds.

Investments, on the other hand, are intended to generate income. Yes, they are “savings” by virtue of definition. However, their purpose is to grow exponentially over time.

The other key difference between the two is regarding risk.

Savings typically involve little or no risk to the safety of your funds. Your bank is likely FDIC insured, and regardless of what happens to the economy and/or stock market, you will never watch your account balance decrease. (Unless, of course, you withdraw funds or incur fees.) Your funds are guaranteed, plus whatever interest the account balance can generate.

Investments involve their fair share of risk, though. Certain products are less risky than others, but there is a direct correlation between the returns you’ll see from your investments and the danger involved.

In other words, the higher the risk, the greater the chance of reward when it comes to investing. Your returns are never guaranteed and, in fact, you could very well lose your investment thanks to shifts in the stock market.

Lastly, there is a notable difference in liquidity between the two. If you need your funds to be accessible in case of emergency, savings vehicles are your best bet. This will ensure quick access to cash when you need it most.

Your Saving and Investing Timeline

So, which financial goal should you choose to focus your efforts on, between saving and investing? For many households, doing both can feel like too much of a strain on the monthly cash flow, so one has to take precedence… right?

The truth is that saving and investing are both incredibly important. Without adequate savings, you could wind up in a bind if sudden expenses pop up, or find yourself unable to reach certain goals down the line (such as making a down payment on a home).

On the flip side, the key to successful investing really lies largely in compound interest. The earlier you start investing, the more your money will grow over time. This is true even if you “catch up” and contribute the same amount to the account later on.

But if your financial situation simply won’t allow you to focus on both investing and saving right now, there are some times where one is more important than the other.

As mentioned above, one of the most important factors in the investment game is time. Without time, you can’t allow compound interest to do its work with your money… which means losing out on growth (read: free cash) in the long run. Let’s look at an example.

In the first scenario, you begin saving at age 25. You make an initial deposit of $5,000 into an investment account, which has an average annual return of 8%. You then continue adding $200 a month into this account for the next 30 years, until you retire at age 55.

When retirement rolls around, you will have contributed a total of $77,000 into that account, spread out over 30 years. However, with an annual growth of 8%, you will have approximately $322,193 waiting for you… all thanks to compound interest and time.

However, let’s say that you decide to put off investing for a few years. You start at 35 (instead of 25) and save $300 a month (instead of $200), still planning to retire at 55.

While playing catch-up is still better than not investing, you’ll be losing quite a bit in the process:

In the end, you will have contributed the same amount ($77,000) and retire at the same time. However, your money won’t have had as long to compound and grow, resulting in a total balance of only $188,048. That’s $134,145 lost!

Setting Your Priorities

If possible, work toward both your savings and investment goals at the same time. Even if you can’t dedicate as much to either as you’d like, the power of compound interest is important for your money’s growth.

The ratio of savings to investments is up to you and dependent on your needs at any given time. If you don’t have a comfortable nest egg saved, you may want to focus on savings for a while and let investing take the back seat.

If your savings accounts are sitting pretty and you aren’t worried about unexpected expenses, you can focus on investing instead. Once a year, take some time to reevaluate your situation and adjust contributions as needed.

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5 of the Best Auto Insurance Companies

Eric Bank | August 8, 2019

Protect Against Collisions and More If you drive a car in the United States, liability insurance must cover it. This type of policy pays for medical and property damage resulting from a vehicular accident. You can also purchase comprehensive and collision insurance to cover other costs. These additional coverages help protect the value of your car should it be damaged. If you are calculating how much it will cost to buy a car, you need to take into consideration the cost of insurance as well. In this article, we’ll review the basics of car insurance and the best auto insurance companies in America, including costs, pros and cons. This is a brief introduction to automobile coverage. Liability Coverage When an accident occurs, liability insurance covers you, household members and authorized drivers for the costs associated with property damage and bodily injury. It covers the cost to repair or replace property damage that you caused. [youmaylike] You are also covered if you cause the bodily harm or death to someone else while you are driving the car. This includes medical expenses, loss of income and specified legal defense costs. Collision Insurance If you are involved in a collision, this type of insurance will help pay for repairing or replacing your vehicle. If the collision is your fault, the coverage may extend to other damaged vehicles involved in the accident. States do not mandate that you buy collision insurance, but your lender or car dealer will if you finance or lease the car. Policies offer a range of deductibles, which is how much you’ll have to pay for repairs before the insurance kicks in. Larger deductibles lower the policy premiums but expose you to more out-of-pocket expenses if a collision occurs. Comprehensive Insurance Comprehensive insurance covers damage to your car that occurs for reasons other than a collision, including theft, fire, vandalism, weather and natural disasters. This coverage is often required if you finance your automobile. You can add riders to this insurance to provide coverage of additional costs, including auto towing, glass repair, daily rental while your car is in the shop and emergency roadside service. As with collision insurance, you can set the deductible on your comprehensive insurance policy to cut your premium costs. Gap Insurance If your car is severely damaged in an accident or other incident, you might find that your comprehensive and collision damage won’t provide enough coverage to pay off the amount you owe on the vehicle. Many policies pay only the fair market value of a totaled car, which might be only 80% of the amount you owe. You can buy additional insurance to plug this gap and ensure you can pay off the car loan in full if the vehicle is destroyed or stolen. Normally, car leases require you to buy gap insurance. If you pay cash or pay off your loan, you can save money by avoiding or dropping gap insurance when no longer needed. Top Five Auto Insurers These five insurers all offer full coverage policies and many additional services. Amica Amica is a superstar among car insurers, winning accolades from Consumer Reports and J.D. Powers. It’s known for handling the claims process smoothly. The average annual cost for full coverage: is $1,360. Pros You can have your car repaired at any body shop, without restrictions. Offers a premium package which, for an additional cost, provides full glass coverage, rental coverage, good driving rewards and identity fraud monitoring. Superior financial stability rating from A.M. Best. Cons Missing some discounts, such as military, low-mileage and prepay discounts. Must speak on the phone to get a quote. Sparse website when it comes to customer education. State Farm State Farm is the country’s largest multi-line insurance company. It excels in customer service and regularly garners high marks from customers. The average annual cost for full coverage: is $1,337. Pros Superior financial stability rating from A.M. Best. Excellent online quote tool, getting customers a quote in as little as five minutes. Easy claim handling and top service from its more than 18,000 agents and its easy-to-use mobile app. Cons Doesn’t offer coverage for new car replacements or uninsured motorists. Missing prepayment and automatic payment discounts. The Hartford While only 11th in size, The Hartford is big when it comes to policy options. It offers rates based on your actual driving as well as full replacement of new cars when destroyed shortly after purchase. Average annual cost for full coverage: N/A. Pros Solid benefits, including superior roadside assistance and towing programs. High marks from customers for their purchase experiences. One of the few insurers with mechanical breakdown coverage for out-of-warranty repairs. Cons Mediocre service interaction according to J.D. Power surveys. Sparse online learning materials. Geico Geico is the second-largest U.S. car insurer. It is a favorite among tech-savvy geeks who appreciate the insurer’s mobile app and excellent online service. The average annual cost for full coverage: is $1,627. Pros Geico offers plenty of ways to save, such as multi-vehicle, driving history and vehicle safety equipment discounts. Special savings for active and retired military members and federal employees. Full-featured mobile app for getting quotes, buying insurance, managing your policy, submitting claims, summoning roadside assistance and making payments. Cons Human help may be in short supply, as just about everything is handled online. No gap insurance is offered. USAA No insurer matches USAA for service to military members. Unfortunately, it's only available to active service members, their families and retired veterans. Average annual cost for full coverage: $896. Pros Superior financial stability rating from A.M. Best. Top-ranked purchase experience score from J.D. Power. Cons Missing gap coverage. Doesn’t offer interior vehicle coverage or new car replacement coverage. Limited availability. The Right One for You Competition in the insurance industry helps drive down prices and prompts insurers to offer money-saving features. For example, your carrier might reward you for a safe driving record and for having a long-term relationship with the insurer. The right insurer for you is highly rated for service, offers the exact coverage you want and does so at an unbeatable price. You should always gather multiple quotes before selecting an insurer, and make sure you get credit for all applicable discounts.

How to Apply for a Business Credit Card

Myles Leva | August 8, 2019

Paying for Business Expenses Applying for a business credit card is something a small business should seriously consider for itself. Business credit cards can provide a range of benefits to a business. They allow a company to build up credit for better borrowing conditions down the road. They’re also quite easy to apply for. In this article, we’ll go over how to apply for a business credit card and other important points to note. What Is a Business Credit Card? A business credit card is a credit card that is intended for business expenses. These cards are not meant for any individual’s personal use, but they are available to businesses of all sizes. What Is a Business Credit Card Used For? Business credit cards are meant for business expenses, and as such, they come with several perks that you wouldn’t get with a normal credit card. Business credit cards typically have far higher credit limits than normal cards, but they are also harder to qualify for. [youmaylike] As a business phenomenon, business credit cards vary their offers greatly, and certain cards are meant for certain businesses. They are also highly customizable when it comes to individual payment terms. Businesses don't always have consistent incomes like individuals do, and business credit cards handle this problem. These cards are used to gain access to a long line of credit, to control employee spending on business expenses and more. One of their other common uses is to make accounting easier, as putting all business expenses on one separate account makes reporting to the Internal Revenue Service easier. In the end, there are many uses for a business credit card. Why Would I Need a Business Credit Card? You might not need one, but if you run a business, you’ll be leaving money on the table by not at least looking into them. Business credit cards can solve many of the problems business owners face. If you need employees to make purchases for the business, a business credit card is the safest option. These cards can be given to authorized users, a status you can easily give to any of your employees. From here, these cards make it easy to monitor employee spending and spot any discrepancies. You can attach customized user privileges to each card to limit spending and place limits on where the card can be used. As mentioned, if you feel like your credit is too limited, business credit cards are a sure way around low credit. According to the American Bankers Association, the average monthly payment on a business credit card is twice as high as the average payment on a normal one. If you’ve found yourself annoyed with the Internal Revenue Service over the complicated reporting processes for business owners, you’re not alone. This is where a business credit card can solve another problem. Simply handing over your business credit card statements to your accountant will make them love you. It will also provide them with the information they need to predict future spending. Another great use for a business credit card is lifting your liability for debts. Liability for credit card debt is determined by the liability offered by the card. If you’re using a personal credit card for business expenses, you are liable for all debts. On the other hand, if you use a business credit card with commercial liability, your business is liable for any debts, which changes the game. Keep in mind that some cards offer joint liability, which leaves both you and your business liable for any debts. Make sure you know what you’re getting into before signing any paperwork. Lastly, just as personal credit cards offer rewards programs, so do business cards. The main difference here is that business credit card rewards are tailored to your business needs. How to Apply for a Business Credit Card Before you apply for a business credit card, you should make sure you’re eligible. For the most part, you only require the following to be able to apply for one: A legal name for your business. A business structure to apply with, such as a Limited Liability Corporation. An explanation of the nature of your business. You’ll typically be given a list of industry types to choose from. A tax ID number issued by the Internal Revenue Service Your roll in the business you’re representing Various business/financial information including: Annual revenue. Number of employees. Length of time in business. Estimated monthly expenses. If you have this information ready, you can apply for a business credit card. At this point, it would be wise to shop around and find the best option for your business. Your decision on the business credit card you choose will have larger ramifications than your choice of a personal credit card. Applying for a business credit card is much the same as applying for a personal one. There are a few differences, but the main thing to remember is that business credit cards are taken more seriously than normal ones, so you’ll have to face a higher bar of entry. This doesn’t mean getting a business credit card is hard, but it does mean you need to arrive more well-prepared than you normally would. To make things easier, you can prepare for certain obstacles in advance. You may need to sign a personal guarantee that you will pay off any debts. Also keep in mind that if you’re the one applying for a business credit card, and your business doesn’t already have one, they will conduct a personal credit check. It may be best to try to optimize your personal credit if you plan on applying for a business credit card in the future. Some Options at a Glance Here are some of the most popular options for small business credit cards: Chase Inc Business Preferred This is a great option for a few reasons. With the Business Preferred card from Chase Inc, you get 80,000 ultimate reward points when you spend $5,000 with the card in the first three months. The card also provides generic, but highly useful benefits for business owners. Business Platinum Card from American Express The Business Platinum is ideal for businesses that spend a lot on flights and travel. This card offers numerous rewards on flight and hotel expenses and makes sure you get something serious back if you use it for these expenses. Chase Inc Business Unlimited The Chase Inc Business Unlimited offers unlimited 1.5% cash back. While we’ve said enough already, they also offer several other perks that are overshadowed by their first one.

Everything You Need to Know About Filing Your Own Taxes

Katie Macomb | August 8, 2019

It's Not Fun, but It Has to be Done Benjamin Franklin wrote a 1789 letter that states, “But in this world nothing can be said to be certain, except death and taxes.” Even at the United States’ early beginnings, federal taxes were a necessary evil to fund various public projects and administrative costs. Today, federal taxes serve much of the same purpose. While virtually no one likes to prepare and file their taxes, it is a necessity if you want to avoid fines and further hassle. It is no secret that preparing and filing your taxes is notoriously complicated. Many people lament that it should not be so difficult to pay the government. However, some of the complications allow people to save money if they discover specific tax benefits. Knowing how to file your own taxes may be a good option if your tax situation is relatively straightforward, or if you are willing to learn the process. Why Do You Need to File Your Taxes Every Year? The short answer is that federal law requires that most individuals file taxes annually. Income taxes are assessed every year based on your income earned during that period. You then pay a percentage of that income to the government, less any deductions, adjustments, or credits that you qualify to receive. If you do not file (and pay) your taxes, then you may be assessed penalties and interest. The Internal Revenue Service (IRS) can even go as far as garnishing your wages and repossessing your property if you do not file and pay as required. The Benefits of Filing Your Own Taxes If you are one of the 43% of Americans that are doing your own taxes, you are certainly not alone. Roughly 53 million people prepared and filed their own taxes in 2018. There are many benefits to filing your own taxes, including: Saving money: Hiring a tax professional is expensive, and many people can prepare and file their returns on their own, completely free of charge. Control: Some people like knowing the exact information that is included in their return and being able to control the data, and for some, knowing precisely how the numbers work out, is comforting. Gain helpful information: When you prepare your taxes, you can see what items saved you money this year or which issues you should address so you can save money next year. While filing your own taxes is complicated, it can be beneficial under the right circumstances. There are several programs online that walk you through the process to help ensure you are taking advantage of all of your available deductions and credits. The Drawbacks of Filing Your Own Taxes In addition to the benefits, there are also some disadvantages to filing your own taxes. These include: Time and effort: Preparing and filing your taxes takes time and work You have to sift through financial information and deal with concepts that you may not understand well. The process can be frustrating and take a considerable amount of time. Error risk: If you do not completely understand how your taxes work, you run the risk of making a mistake because of misconceptions. If that happens, it could lead to underpayment and audits down the road. Questions: Even if you use a tax preparation software, you may still have questions that will remain unanswered unless you do significant research or reach out to a tax professional. For some people, the risk of having a substantial error that triggers the IRS’s attention is enough to scare them away from preparing their own taxes. Preparing for Filing Your Taxes When you begin work on your taxes, you should have information gathered throughout the year. Some of the most common items that you will need include: Social Security numbers for you, your spouse, and any dependents Information about wages, such as W2s or 1099s Investment income information Documents that represent any other source of income Information regarding adjustments to income, such as student loan interest paid, IRA contributions, and health savings account contributions, just to name a few Information regarding potential credits, including, for example, child care expenses, education expenses, or retirement savings contributions Data about any tax payments that you may have made throughout the year Keeping good records will help make tax preparation easier at the beginning of the year. [youmaylike] The Basics About What You Can Claim When Filing You must pay income taxes on all your income earned throughout the year. However, that income is reduced by a few things. The further you can reduce your taxable income, the less you tax you will pay. There are three general categories of tax reduction methods: Standard or Itemized Deductions Everyone can claim either the standard or itemized deductions. Standard deductions are a set amount that is based on your filing status. Itemized deductions are based on actual expenses that you incurred throughout the year. You can choose to use the higher deduction. The higher the deduction, the less tax you will have to pay on your income because your income decreases on paper. Itemized deductions include things like medical expenses, state and local tax payments, and home mortgage interest deductions. Itemized deductions will only decrease your income by a certain percentage, or up to a specific point. Adjustments Some adjustments to your income may also be available. These include things like paying student loan interest or alimony. Adjustments are more valuable compared to deductions because they decrease your income dollar for dollar. Credits A credit decreases your taxable income as well. Some credits are refundable while others are not. For example, you get a child tax credit simply for having children that qualify for that credit, but that credit will not be paid out to you if you do not have any tax obligations. On the other hand, the Earned Income Credit, which is available for low-income filers, will be refunded to you even if you do not owe any taxes. There are a wide variety of deductions and credits available. Take a look at the federal forms and related schedules to determine whether you might qualify for any of these. How to File Your Own Taxes If You Live Overseas If you earned income in the United States as a U.S. citizen or resident alien, you likely need to pay taxes on that income. This is true even if you live overseas. You can still choose to e-file or mail your tax return to the IRS once you have it prepared, just as if you physically lived in the United States. In some cases, you will be taxed on the income that you earned throughout the world. However, you may be able to deduct a portion or all of the revenue that was not made in the United States in some circumstances. Filing Online The IRS offers an online filing option that is free for individuals that have an adjusted gross income below a specific threshold. Generally, your income must be below $66,000 to qualify for this service. You can also file online by using a commercial tax preparation software. Examples of this type of software include: H&R Block TurboTax TaxCut TaxSlayer There are many programs available that will file your taxes for you, often for a fee. Knowing how to file your own taxes can be a great way to save money, but it can be tricky as well. If you want to file your taxes yourself, be sure to read the form instructions thoroughly and get familiar with various tax saving opportunities before you begin preparing your return.