Many individuals, particularly those who are not financially adept, are made to believe that the only advantageous way to keep money is inside a bank. Some consider putting their money in a savings account for safety reasons. They do not want their hard-earned money vulnerable to theft or loss. Others think it is more convenient, especially if they want quick and easy access to their money since there would be ATMs available 24/7, which they can also use when paying for most of their purchases. Having a savings account is also a way for people to build up their bank relationship. Having a positive history of bills payments and deposit transactions would increase the chances of securing a loan.
However, a lot of individuals are becoming more knowledgeable in handling their finances and are considering more profitable ways of using their money instead of simply putting them in banks. One of them is safe assets.
What is Safe Asset?
A safe asset is a type of resource with economic value, which does not have a high risk of loss. It could be in forms of money market funds, treasury bills, mutual funds, gold, cash, or real estate property. The safest assets are traditionally known as risk-free assets like sovereign debt issued by developed countries.
This type of asset is often regarded as safe havens, which gives investors a profitable, risk-free investment that is able to withstand high volatility of the market whilst preserving capital. Owning a safe asset is also a good way to diversify an investor’s portfolio which is highly beneficial when there are sharp fluctuations in the market like in economic recessions where most investments have market values that steeply plunge.
Bank Savings vs Safe Assets
Most people commit the mistake of regarding saving and investing are one and the same. In reality, they are related but are different from each other. They should not be confused as each one leads to a different outcome depending on an individual’s financial goals.
Bank savings is the total amount of money an individual has left after spending from the disposable income. This refers to the money set aside for use in the future, often for financial emergencies. This can also be used for spending in the near future – i.e. a new camera or furniture. Most people will put their money in the bank so there would be fewer chances of spending it immediately. Bank savings are often used to achieve short-term goals – in three years or less.
Safe assets are investments, wherein money is set aside for a long-term goal, at least five years. These safe assets are items acquired with the hope of appreciation or generation of income.
Which One is Best For You?
Choosing the best way to safe keep your money depends on your financial goals. Do you intend to use the money in the near future? Better put your money where you can easily access it since bank savings are more liquid. If you want to save and earn money for your retirement, put it in a low-risk investment vehicle such as safe assets.