One of the most popular questions people ask is whether they should save their money or invest it. The simple answer: both. While investing your money traditionally earns more than a savings account, there are risks and downsides.

Before you jump straight into risk-based investments, it’s essential to understand the pros and cons of both options

Advantages of Saving

There are several savings options available to members at the credit union. These include savings accounts, money market accounts, and certificate accounts. While each option is slightly different, they all share vital advantages.

• Less Risk. Unlike risk-based investments, such as the stock market, your savings at the credit union will only grow. In addition, all accounts at the credit union are federally insured by the National Credit Union Administration up to $250,000.

• Easier Access. Should you need immediate access to your money, you can quickly withdraw it from your credit union accounts (with the exception of Certificates, which will incur early withdrawal penalties). Your money is not tied up or subjected to holds as it can be with other investments. Furthermore, you can often access these funds instantly via an ATM or debit card.
  
  

Disadvantages of Saving

While savings offer safe and consistent returns, there are downsides when compared to other investment opportunities.

• Earn Less. The most significant drawback of saving is that the returns are typically lower when compared with other risk-based investments. While some investors may be more comfortable with greater risk in exchange for potentially higher returns, conservative investors may opt for lower returns with little to no risk. This may especially be the case when first starting out on your own or heading into retirement.

• Easier Access. While quick access to your money is an advantage, it can also become a disadvantage. With easier access, there’s a greater temptation to dip into your savings for frivolous spending.
  
  

Advantages of Investing

When it comes to investing your money, the largest draw to members is the potential to earn higher returns. However, it’s important to remember that investing, especially for retirement, is a long-term strategy and must be treated as such.

• Better Returns. Market-based investments usually offer greater yields when compared to traditional savings accounts. However, there is also the potential for loss, so it’s highly suggested you work with a financial advisor to limit your exposure to market fluctuations.

• Long-Term Strategy. Investing is more of a long-term approach to growing your money. With your money well-diversified within the market, you’re typically better positioned to handle economic fluctuations and inflation. There are also a variety of tax-advantaged accounts available to help you grow your money.
  
  

Disadvantages of Investing

The greatest drawback of investing is risk. Whether you’re investing in the stock market, real estate, or newer options, such as cryptocurrency, your risk exposure is much higher when compared to saving your money.

• Greater Risk. While the potential to earn more draws most investors, the ability to lose money, likewise, keeps many savers away. The market is prone to short-term fluctuations and corrections that can cause you to lose money. By working with an experienced financial advisor and focusing on the long-term, you can effectively plan to limit your loss exposure.

• Not Liquid. When your money is invested, it may be harder to access your money if necessary. While a savings account provides quick access, your invested funds may require days to withdraw. If the market is down, pulling out your money may result in additional unforeseen losses.
  
  

Saving AND Investing: A Healthy Balance

Everyone wants to grow their money. However, there are many stages in life that require different types of growth and access. Start by building your emergency fund. Once you have three to six months of living expenses saved in your credit union account, switch your focus to investments.

For example, if you have $400 left to save each month, split these funds between investments and your emergency fund. Place $100 in investments and $300 into your emergency fund. Once your emergency fund reaches your desired amount, you can then decide to invest the entire $400 each month or continue to grow both accounts.

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We’re Here to Help!

When it comes to growing your money, there are many options available. As your credit union, our purpose is to help you make the best financial decisions for your unique situation. Whether you’re interested in opening a savings account or speaking to a financial advisor, our team is ready to help.

For information about concierge banking services, deposit options, and other financial guidance, contact our Private Banking team. To speak with one of our financial advisors about investing, retirement planning, and more, contact Freedom First Wealth Management.

Securities offered through LPL Financial (LPL), a registered broker-dealer (member FINRA/SIPC). Insurance products offered through LPL or its licensed affiliates. Investment advice offered through Good Life Financial Advisors, LLC, a registered investment advisor and separate entity from LPL Financial. Freedom First Federal Credit Union and Freedom First Wealth Management are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Freedom First Wealth Management, and may also be employees of Freedom First Federal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from , and not affiliates of, Freedom First Federal Credit Union or Freedom First Wealth Management. Securities and insurance offered through LPL or its affiliates are: