Financial freedom is a dream for almost everyone out there grinding day and night to get the much-needed cash for the sustenance of life. Attaining financial freedom is definitely not impossible. However, it involves a lot of dedication and hard work. 

In the bustling world we live in today, the views on savings and investment are heavily debated. Some see savings as a stable way of reaching their financial goals while others prefer investing as their golden ticket to their dream life. Either way, both are equally important as you want to be retiring with a comfortable amount of funds to live on for the rest of your life.

The question is: Is one more effective than the other to achieve financial freedom? 

All About Investment

There are many types of investment that you could set foot in these days. Though, the risk and returns associated with them may vary from one another. 

Listed below are several types of investments that are popular in Singapore:

• CPF Investment Scheme
• Real-estate investment Trusts (REITs)
• Exchange Trade Funds (ETF)
• Singapore Savings Bonds
• Robo-advisors 
• Stock exchange

Why Should You Invest? 

Investment allows more growth potential for your money than typical savings accounts. 

By investing, you can beat inflation if your returns keep up with the inflation rates. 

The return of a well-managed portfolio lies somewhere between 8%-11% p.a. which surpasses the highest interest rate for a savings account that reaches up to 3% p.a. Investing can make your money work for you instead of just lying in your savings accounts. 

Investment can be done within a short-term or long-term period depending on your experience and personal preference. Simply diversify your investment portfolio by incorporating various types of investments. As the saying goes, do not put all your eggs in one basket. You can choose low-risk or high-risk investments based on your capability or have a healthy mix of both. 

If you are just starting out, it would be best to do your thorough research, talk to other seasoned investors, and heed the advice of professionals before making any move with your hard-earned money. 

What Should I Be Cautious Of When I Invest? 

As all that glitters is not gold, no matter the returns, investment entails a high risk even when managed properly. The volatility of investments vary from type to type but altogether it is still higher than that of a savings account. 

The markets fluctuate every day, and so can your investment returns. The key is to invest for the long term and never time the market. You should only invest the money that you would not need in the near future. 

Hence, it is crucial to start investing once you have set up your emergency fund, set aside a reasonable amount of money for your short-term goals, and have a steady stream of income.

As easy as it looks, investment is quite complicated especially for someone with minimal financial know-how. You would have to constantly update yourself with up-to-date information regarding markets, companies, and politics. 

All About Savings

Every major bank in Singapore competes which each other trying to attract more clients with lucrative interest rates. These rates are like a token of appreciation for your trust in them.

Some of the best rates offered for savings accounts are as follows:

• Maybank Save Up (Up to 2.75% p.a.)
• DBS Multiplier Account (Up to 3.00% p.a.)
• UOB One Account (Up to 2.5% p.a.)
• OCBC 360 Account (Up to 2.15% p.a.)

Why Should I Save? 

Savings are commonly preferred as it provides a sense of security for hard-earned money.

The cash in your account will not deplete unless you choose to withdraw. The bank also guarantees the protection of your savings. Even when the stock market crashes, you know your money is safe in your savings account. 

Compared to an investment account, your savings have more liquidity. You do not have to wait a couple of days to cash out, you can withdraw it directly from an ATM or make a transfer online.

In short, you would not be putting your money at risk and your money will be there whenever you need it. 

What Should I Be Cautious Of? 

As safe as it can be, savings account do come with their own downside. The interest rates offered by banks may fluctuate depending on the economic or political status of the country. Since the financial institutions decide their rates, you do not have much control over your returns. 

Inflation is the main enemy of your money stashed in the savings account. You could lose purchasing power over a long period of time due to inflation. What may seem like a lot today, may become very little in 20-30 years. With the constant rise of living costs and prices of goods, the money you stash in your savings account may not be sufficient to sustain yourself. 

As humans, we are easily tempted to give in to our guilty pleasures. The high liquidity of a savings account means easy access to splurge for an expensive shoe, a fancy dinner, travelling abroad or paying for a down payment for a new car. Neither of these items would give any returns which would just prolong the time taken to reach your financial freedom goal. 

Savings Or Investing? Find Your Balance 

There is no one perfect way to reach your financial freedom goal. Both savings and investments can be equally rewarding financially if done mindfully. If you are willing to take more risk for higher returns, then investment is the right choice. Otherwise, look into various savings accounts and choose the best one to reap the most benefits. 

However, balancing between savings and investing can be the best way to get the best of both worlds! Save for rainy days and invest for the long term. Most importantly, equip yourself with the right knowledge and get advice from certified professionals before making any move.