Should you save or should you invest?

Let's say you have some money leftover from your monthly expenditures. What should you do with it?

Before you make any decisions involving money, consider your situation and what you can afford. This will help you decide what you can do with it.

Saving is simply holding up money for future use. This is the first step in building your wealth, and it's an important one. You might need money for something you want and it's essential to have some cash reserves in case there's an emergency.

How much should you have in savings? It's a personal question, but many financial experts say you should have 3 months of your salary set aside 'just in case'. Yes, you can hide your banknotes under your pillow, but it's much better to set up a savings accounts. You won't risk losing any cash or having it stolen, plus you'll earn some interest. Choose a savings account that gives you easy access and supports recurring transfers, or check out our different savings options. That way, you can save bit-by-bit on a regular basis without a fuss.

While the money in your savings account is safe and secure, you'll still be affected by inflation. As inflation goes up, it'll chip away your money's purchasing power, leaving you able to buy less with what you save. That's why you should also consider investing once you have a comfortable cushion of savings. If you want to know where to start, check out our latest promotional interest rates and start saving.

Investing is putting your money into something you think will go up in value over time, which of course will come with some risks.

There're different investment misconceptions floating around, but don't let them scare you and we're here to help. As a start, you can try investing in something you're comfortable to hold for a long period of time to leverage its potential. The longer you can invest for, the better it may be, as giving it time to grow may give you a better return.

Stocks, or securities, are the first investment many people consider. With stocks you’re buying a tiny slice of a company, so you may gain or lose money depending on the company's financial performance. But you don't necessarily have to sell your shares to make money: successful companies may also pay dividends to shareholders.

Another advantage for stocks is that it may be easier to manage. You can simply place your money in a lower-risk and more stable stock and hopefully watch it grow. You can also invest in a more volatile stock, monitor it, and sell it if it hits a favourable point. You don't need to involve any middleman or incur any management fees - it's all in your hands.

You can also start with unit trusts. It takes an initial investment of SGD1,000 plus a minimum of SGD100 per month. This gives you something to invest in whether you're looking at a period of 6 months or more than 5 years, which also gives you a piece of a ready-made investment basket managed by experts. With many options available, it’s a good way to access different opportunities and markets, and you can find one that suits your risk appetite and goals. If this sounds good, you can set up monthly unit trust investment plans with us.

Why not both? Here's how you could divide up saving and investing:

• Savings for short-term goals + an emergency fund worth 3 months of your salary
• Investments for long-term goals - remember to let them ride out the markets' ups and downs

Start by exploring your options, then find a balance between saving and investing that you feel comfortable with, as both are vital to your personal finance. If you're still not sure of whether you're ready to invest, or you'd like some helpful tips on how to start saving, call our hotline and speak with one of our experts.