Episode 785 Is Savings Investing
[00:00:00] Scott Maderer: [00:00:00] Thanks for joining me on episode 785 of the inspired stewardship podcast. I'm Doug Norgen and I'm Carol thinner. And we're the authors of brazing your money savvy family for next generation financial independence. And we challenge you to really focus on becoming money savvy. One way to be inspired to do that is to listen to this, the inspired stewardship podcast with my friend Scott Mader.
[00:00:34] so you can move from one mindset to the other, by looking at the goal that you have and actually thinking about, is this all something that I need a long-term. Proactive mindset. Is this something where I need to think about how this will change over a long period of time? Is this something that I need to participate in?
[00:00:57] Welcome and thank you for joining us on the [00:01:00] inspired stewardship podcasts. If you truly desire to become the person who God wants you to be, then you must learn to use your time, your talent. And your treasures for your true calling in the inspired stewardship podcast will learn to invest in yourself, invest in others and develop your influence so that you can impact the world.
[00:01:30] In today's episode about investing in others, through stewarding your treasures. I talk with you about the difference between investing and savings. I talked with you about why there is both a math difference and a mental difference. And I also share some tips on how you can move to an investing mindset instead of just a savings one.
[00:01:49] Okay. As we talk about stewarding your treasures, wouldn't it be great. If you could support this podcast and do it without costing yourself an extra dime. It turns out you [00:02:00] can. All you have to do is use inspired stewardship.com/amazon. When you're ready to make a purchase via Amazon and a small commission, we'll come back to support the show.
[00:02:12] If you enjoy the show, when you're ready to buy from Amazon, just use inspired stewardship.com/amazon. One of the questions that comes up from time to time is the difference between savings and investing or the way that we use those two terms. We have a tendency to use them interchangeably. We talk about saving for retirement or investing to buy a new car, but there is actually a difference between those two terms.
[00:02:41] And there's a difference by around why and when you would want to use them as well. Yeah, the simplest definition is that savings is usually used for a short term goal while investing is used for a longer [00:03:00] term goal. As we talk about that let's first look at what is the pros and cons of savings versing as investing.
[00:03:10] Well savings. Generally, you're going to see the amount of money that you have steadily increase, but not necessarily by a large amount, unless you're continuing to add to that savings. And because of that, because it doesn't earn a lot of money in interest, it tends to lose purchasing power over time. In case you didn't know what interest is simply the idea that the prices of things go up over time.
[00:03:38] This is. Over simplification. And because of that, the dollar that you have today, won't buy as much in the future. So you can lose that ability. If all you're doing is savings. It less, the interest that you earn is greater than the inflation rate, which over a long period of time is generally not with savings.
[00:03:58] You can safely rely [00:04:00] on hitting your goal in a certain amount of time, because you can calculate, if I need to save up $6,000 and I've got. Six months to do it. That means I need to save a thousand dollars a month and you will actually get there. But usually because you're not earning interest, you have to add more money over time and you in investing.
[00:04:21] You potentially get higher returns than savings, but unfortunately investments go up in value and they also go down and value. And that means that as you add money to it, because they can go up in value, you often don't have to contribute as much money because that interest that you earn makes up some of the progress.
[00:04:43] But the problem is if they happen to go down in value, right, as you're reaching that goal, you may have to delay. Actually hitting that goal, all of a sudden the thing that you were investing for, you may not be able to do it right when you want to, because of the timing of the ups and downs. [00:05:00] So let's talk about what a long-term is.
[00:05:02] Anyway, I've used the term longterm versus short term several times throughout this. Usually you will see things between five and seven years. There's anything less than that is short term. Anything longer than that can be considered long-term. So generally, if you're young, you want to be investing. If it's a goal that's 20 or 30 or 40 years out into the future.
[00:05:27] And if it's something like just savings up some money to pay your insurance bill that comes due in a few months. Then you would just save, you wouldn't invest and you can see you when you think about the pros and cons, why that would be true. But the interesting thing is all of that discussion is about the math difference between savings and investing.
[00:05:49] It's about the finance part, but as I've talked about repeatedly on the show, personal finance is much more personal than it is [00:06:00] finance. There's also a mind. Part of this, a mental part of this, the idea of investing inherent in it is the idea that I can find things that over time go up in value. I can participate in the success of companies by buying stocks.
[00:06:21] By participating in mutual funds by investing in my 401k, by investing in a four Oh three B, by doing these sorts of things that give me investing long-term opportunities, I can participate in the success of those things are maybe it's investing by buying real estate. Because again in general, real estate tends to go up over time and you can sell a piece of property later, or maybe it's finding other ways to generate income.
[00:06:52] The point is investing has a long term mental outlook and it tends to be an abundance [00:07:00] outlook. It tends to have the idea that over time, I can find things that go up in value savings tends to have the mindset of a little bit more of protection, a little bit more of insurance or protecting against the future because you tend to save for either short-term goals or for things like emergencies that allows you to protect yourself against harm in the short term.
[00:07:27] Mentally, one of these is not good and the other is not bad, but they're used for different purposes. And the truth is if all you're ever do is focus on savings on protecting and doing the short term. You often won't provide for the longterm. And similarly, if all you ever do is think about investing, oftentimes you will have debt and large emergencies in the short term.
[00:07:54] So you can move from one mindset to the other, by looking at [00:08:00] the goal that you have and actually thinking about, is this all something that I need a long-term proactive mindset? Is this something where I need to think about how this will change over a long period of time? Is this something that I need to participate in in a way that allows me to take part in the growth of something?
[00:08:22] Or is this something that is more to protect against the short term? Where what I need to do is something that I can get access to relatively quickly, and you can flip your goals to match them with the proper mindset and math as well. Thanks for listening.
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