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Financial education
Two different jobs, two different tools. Using one where you needed the other is a common and expensive mistake.
This article mentions investing. It is educational and does not recommend any specific investment or guarantee any return. Investment values can go down as well as up. Consider your own circumstances and consult a licensed advisor before investing.
Saving and investing are not two words for the same activity. They do different jobs, and the mistake that costs people most is using one where they needed the other.
Saving keeps money safe and available for when you need it.
Investing puts money at risk in the hope it grows over time.
Save when the money has a job in the near future, or an unknown one:
For these, a 20% return matters far less than being able to get every shilling back on the day you need it.
Invest when the money can genuinely be left alone for years and you can afford for it to fall in value along the way:
Higher expected return means higher risk of loss. Always.
There is no arrangement anywhere that offers high returns with no risk. If there were, everyone would use it, and the returns would fall.
So when someone offers you an unusually high, guaranteed return, only three things are possible:
For most people, in order:
Step 2 is undervalued. Clearing a debt costing you 36% a year is equivalent to a risk-free 36% return, which is better than nearly anything available to you elsewhere.
A savings group sits between the two. Savings held for you behave like saving. Shares behave more like investing — they can grow through dividends and they can lose value.
Knowing which of the two you are doing at any moment is exactly the point.
