BY JENNIFER FREDERIKSEN-BROWNE
The answer is yes. Most people cannot distinguish between saving and investing and often use the term interchangeably. But there is a difference between the two. Saving is putting money away to reach a certain goal such as a vacation or purchasing a new vehicle, while investing is putting your money into something specific with an expectation the value will grow over time; therefore, investing is an opportunity to create wealth.
You will find that putting your money in a savings account may earn you an interest rate anywhere from 0.05% to 2%, this is where investing comes in. An investment allows you the opportunity to create wealth at a higher return. For example, if you compared a savings account to an index market account that follows the S&P/TSX composite with an average annual return of 4.6% it is clear that you are missing an opportunity. History shows that long term investing will grow a lot more than just saving alone.
If you had invested $5000 in global equities between April 30, 2000 and April 30, 2020 the value of your investment would have gone up and down. However, if you stuck with it, you would have a considerable amount more at the end than if you left your money in a savings account. See chart below:
Source: Fidelity Investments ULC.
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