Having money to set aside after paying monthly expenses is a situation every working adult strives for. With this extra money, you can plan for a rainy day or for your family’s future. If you have a little cash left over after paying bills, it is important to make use of this advantage intelligently.
Opening a savings account to store that money is a common first step toward putting funds aside safely. The accounts are straightforward, offering low risk and modest interest gains on what is deposited in it. On the opposite end of the spectrum is investing that extra, hard-earned money. While some investments carry varying levels of risk, it can be matched by the rewards. Usually, riskier investments provide higher returns. Determining which of these strategies is best for you can depend on four key factors: risk tolerance, the intended goal, how much you have to start with, and your current age.
If you can allocate your money to both types of wealth accumulation tools, you gain a security net and create a nest egg for the future. Essentially, the more money you have the more you can diversify where those funds go. If you are like most people and only have limited funds to start with, how do you decide the best option? Here are some features of savings and investment tools that can help you decide. The key point to remember is that either way, being in the position to choose whether to save or invest your extra cash is a good problem to have.
Generally speaking, savings plans help you to build wealth with very low risk involved. This option tends to be safer because the only way your funds decrease is if you make withdrawals. The interest rate on these plans will also be quite low, meaning that the potential to accumulate money over time will be less. If you start saving at the beginning of your career, it can be a reliable way to help you reach short-term goals like buying a house or preparing for your child to go to college.
Options available in Bangladesh include basic savings, in which account holders make regular deposits, and money market savings accounts that have higher interest rates. However, there is also the expectation that account holders will maintain higher balances. There are also saving certificates that are issued by the government. The National Savings Certificates offered are the five-year Sanchayapatra, three-month profit-based Sanchayapatra, Pensioner Sanchayapatra, and the Poribar Sanchayapatra, according to Bangladesh Bank.
The next option to uncover is what is investment and how it can also help Bangladeshis reach their goals. Investors have the potential to generate higher returns and grow their initial investment faster than with a savings account. Additionally, with compounding returns, not only do you earn interest from your investment but the returns on these contributions earn interest as well. This means that you may be able to contribute less money overall to see positive returns.
The downside with any investment is the potential to lose money or have the value of your investment drop before you need to use the money. For this reason, investments can be more valuable if you have long-term goals for the money and the time to wait for investment values to rebound. This gives you the chance to build wealth over time for your descendants, as well as provide guaranteed income for you and your spouse after you retire.
Alternatively, an insurance savings plan can deliver the security of a short-term savings with the opportunity to provide for long-term needs. Savings and investment plans, like those offered by MetLife [https://www.metlife.com.bd/solutions/savings-investments/] can deliver the best of both worlds. Some options enable you to make a one-time deposit into an account and earn annual interest that is credited as your existing life insurance plan nears maturity. Other options deliver a high rate of return on the policyholder’s premiums to help build a nest egg for retirement, while also providing life insurance protection, like MetLife’s LifeLine [https://www.metlife.com.bd/solutions/retirement/lifeline-updated/]. That way, if there is a bump in the road on your life’s journey your family can maintain their lifestyle without enduring any hardship.
If you are faced with the decision of how to make use of some extra cash, a savings and investment plan is a financial tool in Bangladesh that helps you prepare for all of life’s uncertainties while consolidating premium payments. Talk to a financial advisor about the option that is right for you and your family.