What is the Best Saving Strategy?

Saving is not an income, even though they say a penny saved is a penny earned. There is a lot of difference between saving and earning. When you save money regularly, it cannot be labeled as passive income. When you save, it is your own money. Therefore, there are no profits attached to it. However, if you save money regularly and then when it accumulates and you save in high yield saving accounts, fixed deposit bank account, for example, and get a 9-10 percent annual return on your saving, that can be labeled as passive income. However, in order to earn passive income from a High-Yield Savings Account, you already should have a substantial amount with you. Even if you want to earn passive income from stock market investment, you need a lot of investment to receive high returns. The best way to generate passive income is by starting the business.

What is the Best Saving Strategy?

You need some hard cash at home, especially to buy essentials or use for immediate uses but saving cash at home is not something you should be doing. Only kids should save money at home, especially in their piggy banks. All adults should save money in banks. Even kids are recommended to save money in banks. While the value of money might go down due to inflation, therefore, it is recommended that you invest the money instead of saving cash, however, saving money in banks at least allows you to collect interest. When you save money, try to save in high-yield bank accounts so that you can earn better interest. Banks are trusted financial institutions, and there will never be unauthorized withdrawals, if there are you can immediately inform your banks and actions will be taken. As far as charges are concerned, you can avoid taking paid services such as text messages, check book issuances, etc.

You can set your goals for saving, however, if you cannot stay within your goal, you might not be able to stay within your goal. Sometimes there will be emergencies and even if you try hard to stay within your goal, you might not be able to save. Therefore, making saving goals is good but the most important thing you need to do is stay within your goal even when you are facing financial difficulties in life and even when you desperately need to use the money that you aim to save. Therefore, in order to save money, you will have to use a better approach. For instance, instead of saving hard cash, try using your money to make an investment. Well, investment can be risky, however, in most cases (if you choose your portfolio wisely) you will be on the profitable side. You can also buy life insurance, which is a good saving strategy.

How to Start Saving: Best Alternatives to Bank Accounts

Banks accounts are not the ultimate place to save money, there are a lot of options available. Instead of bank accounts where your money could lose value due to inflation or your money could be lost because only limited funds are insured, here are some options you should consider.

Security Bonds: These bonds are issued by government agencies in order to raise funds for certain projects. You receive fixed interest on Security Bonds for the period of fixed term.

Treasury Bills: Government issues these bills when it needs funding for some projects. You receive fixed interest for the fixed term

Mutual funds: These are actually investment schemes, but work just like saving accounts.

Having said that you also sometimes need cash immediately, therefore, when you lock your money for a certain period, you might experience crisis during an emergency. Therefore, you should also save some money in banks for emergency situations. But make sure these are high yield saving accounts such as fixed deposit bank accounts.

Different Ways to Save Money

It can be risky, however, one of the common ways to save money is keep it safe in a safety locker in your home. A better alternative is to save money in saving accounts in bank. When you have money in saving accounts, you can receive interest on your deposit. The interest rate differs country to country and banks to banks. Here are other common ways to save money.

Fixed deposit accounts: A normal saving account will give you small interest rate, however, the fixed deposit account has higher interest rate (in my home country, normal saving accounts have 5-6 percent interest rates, where as fixed deposits have 10-12 percent annual interest rates). However, unlike saving account that allows you to withdraw your funds whenever you want, you cannot withdraw your fixed deposit funds until the maturity period.

Gold: One of the major issues of saving money in banks, either in a normal saving account or in a fixed deposit account, is the depreciation of your monetary value due to inflation. Therefore saving money as gold can be a better option. The value of gold will continue to grow over the period of time.

Corporate bonds: Corporate bonds are offered by businesses. You get fixed return on your money for a certain period. Corporate bonds are actually loan you give to the company.

Combining Saving and Investment

There is no need to choose between saving and investing, you should do both of these things simultaneously. As soon as you start making money, you should start saving. You should have three different saving accounts, one, an emergency fund, which you can use during emergency situations and financial crisis, two, retirement savings, which you will be using to pay your bills after retirement, and three, saving for investment. In order to invest, you need money, unless you inherited property and money, you will not have any funds for investment . The only way to build investment funds is through saving. You should save money and use your savings to make an investment.

You can earn a living by working on a job, but you cannot build your wealth through your paycheck. You need savings, but your savings cannot build your wealth. Therefore, you need to use your money to build passive income sources. One of the easiest ways to build passive income is through investment, when you have invested, your assets will not only grow but also give you profits. Your wealth will gradually build if you continue to invest and reinvest. People have limited productive time, you cannot work when you are old, and you can work when you are sick. If you are old or sick, you need income, so if you have managed to build a passive income when you were still young and when you were not sick, the passive income will help you maintain your life. Having passive income also means you have multiple sources of income.

Saving is Mindset

Saving is not about how much money you earn, saving is a mindset, it is a habit. You make $1000 and still be able to save 20 percent of your income, and you earn twice that amount and not be able to save even $1 with the same lifestyle. A lot of people believe that they should first pay their bills, spend on their wants and the save the remaining amount. However, if you start spending money on your necessities and wants before you save, you will not be able to save even a penny. The moment you receive your pay check, you need to deduct 10-20 percent and save it in your saving account. With whatever is left on your hand, you will have to manage everything from spending on essentials to spending on your luxury. The more you cut your expenses, the more you save. You can even minimize your expenses on essentials, if you classify what you cannot live without and what you can easily let go.

Investing is better because that's how you build your wealth, no one has become wealthy just by saving money. However, before you can start investing, you need to save money, when you don't save money how would you get funds for investment. Well, you can also invest by borrowing money but this strategy is risky because sometimes you end up paying more interest on your borrowed money compared to the rate of return on your investment. If you don't have money to invest you can also sell your property to invest money. However, this is also risky as you might not be able to build that asset. For the beginner, the best strategy is to start small. For instance, save every penny you can for 12 months, and by the end of one year you will have some funds and you can start investing this money and always compound your investment.