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Investing vs. saving, which is right for you? | Money Smart

A York College professor of finance explains the difference between the two, and how much money you should be putting into both.

HARRISBURG, Pa. — Some videos on social media suggest saving your money is useless and you should instead be investing it all. 

When it comes to investing vs. saving, which is right for you? Pawan Madhogaria, an associate professor of finance at York College helps us break it down. 

"Saving may be the first step, but then what do you do with that saving? That is where the rubber meets the road," Madhogaria said. 

He said saving and investing go hand-in-hand. However, saving too much of your money in a savings account with a return lower than the rate of inflation, which is typically around 2-3%, may not be beneficial. 

"Over long periods of time, you experience inflation and if you are not generating returns enough to offset that inflation, then in real terms, your money is losing value," Madhogaria said. 

He said you have to do your own assessment of the risk you're willing to take with your money. 

"Everybody has to consider their risk tolerance and then decide which asset classes to invest in," he added. 

Stocks are considered riskier than bonds, which are riskier than a savings account. The younger you are, the riskier you can be when it comes to choosing where to invest your money. Madhogaria suggests the "100 minus age" rule. You subtract your age from 100 to determine how much money you're investing in today's market. For example if you're 30, you should be putting 70% into stocks and 30% into bonds. You should also understand these are long-term investments. But again, this isn't a hard rule. 

In the end, if you're still not sure what to do, Madhogaria suggests finding a trusted financial advisor to help you decide what the best saving and investing route is for you.

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