We have all been living through tumultuous times as of late, to put it lightly. Finances are always tricky to contend with, but right now, it feels worse than ever. It leads a lot of people to think about how they want to utilize their savings: specifically, to invest.
Now, that is not to say that you should not keep any cash assets around.
Those are good to have, especially if you are in a pinch and do not have time to liquidate something. However, when you are considering other ways beyond only having a savings account, then you can really expand your horizons.
Today, we will be discussing some of the best ways to make the most out of your savings.
Hopefully, you’ve already started some form of savings account or an equivalent – articles like this one demonstrate how important it is to do so. That way, you can be prepared for the unexpected, even in emergencies.
With that in mind, make sure to stick around if you have savings, but are not really sure what to do with it outside of letting it sit in a bank account! There are all sorts of possibilities, after all.
Investing
Out of all the things we can do with our savings, this is probably advice that you have heard before. It is parroted over and over again, everywhere really, but we feel it is worth covering again. Everyone. can offer their own unique approach and spin to it, after all, and there is a ground to cover.
The main question folks have in regard to investing is simple: what should we be investing in? Unfortunately, the answer is a lot more complicated, and there are a lot of layers to consider. For that reason, we will be dividing the types of investment here for you today. Just keep in mind that this is not necessarily a comprehensive list.
Stocks
When people think of investing, these are probably the first types of assets that come to mind. You can read more about them here, if you would like some background information. That said, they are not too hard to understand.
When we buy a stock for a company, it means that we are buying a percentage of ownership. Typically, this percentage is quite small – fractional, even. However, as the company we bought stock from succeeds, we will make money off of it in one way or another.
There are a few various kinds of stock, of course. Some generate money for us just by the merit of existing, while others will only really give us revenue when we choose to sell. Most investors prefer to have a mix of the two in their portfolios.
Bonds
When we think about the “classic” types of investments, the other assets that come to mind are government bonds.
Here in the United States, they work fairly simply: if you purchase one, it acts as a “loan” of sorts to the government. The longer you hold it, the more money you will receive in return when you decide to cash in on it. This is because they garner interest.
Most banks will process bonds when you do decide to get the return on your investment. Just keep in mind that if the government defaults at any point, then you may not get as much in return. Still, they remain a reliable staple in the world of investing.
Precious Metals
Now that we have covered the simple stuff, let us turn our attention to a different asset class: commodities. Commodities are a wide-ranging field, of course, but the most prevalent ones in the investing scene are precious metals.
What are precious metals, then? Well, the big four that you will want to know are gold, silver, platinum, and palladium. Resources like Blanchard Gold can offer some guidance on what they are, as well as how you might start investing in them.
For now, we will focus on the merits behind them.
Perhaps the biggest draw of precious metals is that they can serve as a way to protect ourselves against inflation.
Gold in particular is often called a “hedge” against inflation. The idea here is that while paper currency like the United States dollar loses value over time inherently thanks to inflation rates, something like gold does not lose that value.
Therefore, you are not losing any spending power when you opt to invest in gold! The same can somewhat be said for silver, palladium, and platinum, but most investment companies and financial advisors do specifically focus on gold.
This is likely due to how accessible it is in comparison to some of the other options, especially platinum and palladium.
There are a ton of gold vendors.
As far as whether precious metals are the right style of investment for you, it really depends on the individual. However, they are becoming a staple of most portfolios, if only so that investors can ensure that some of their savings will not lose value thanks to inflation.
Let us face it, inflation is something everyone needs to be concerned about these days.
Retirement Funds
Another way that we can make the most of our savings is by depositing them into accounts designed specifically for retirement planning. There are a variety of them, of course. Some of the most notable ones are 401(k) plans, pensions, and individual retirement arrangements (IRAs).
401(k) plans and pensions are both ones that are opened and held in tandem with an employer if they are offered. Often, contractors do not receive options for either, so keep that in mind if you are a freelance worker.
Typically, details on these sorts of plans will be included in the contract when you accept a position but feel free to check in with your employer and ask about it if you have any questions.
Individual retirement arrangements are more widely available in comparison because anyone can open one.
Usually, they are opened through a bank or similar financial institution, and the main benefit here is that there are certain tax benefits to be had when we use IRAs. Remember, though – there are annual contribution caps.
With Roth IRAs, you are charged taxes upon depositing the money into your account. When you withdraw in retirement, you will not be charged anything. This is ideal for anyone who thinks they will be in a higher tax bracket once they retire.
In contrast, the traditional individual retirement arrangements do not charge tax when you initially contribute, but instead when you make withdrawals. They are preferable for anyone who thinks their tax bracket will be lower in retirement than when they work.
Choosing between the two can be difficult to consider talking to a financial advisor if you are not certain.
Now, there is one other type we would like to highlight: self-directed ones. Remember how we discussed precious metals? Well, many people who invest in an asset like gold end up depositing it into a self-directed gold IRA.
Bullion and certain types of coins are both eligible, amongst a few other specific assets.
As you can see, there are a ton of options when it comes to making the most of our savings. Depending on how much money you have set aside, and what your plans for the future are, hopefully, this guide has given you some inspiration!