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POB 4.03: Understand saving and investing options for clients SAVING AND INVESTING BASICS:1. Reasons is borrowed by the following:a. Individuals: to large ticket items such Astor cars. Businesses:
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01
Determine your financial goals: Before deciding between saving and investing, you need to clarify your financial goals. Are you saving for short-term expenses or long-term objectives?
02
Assess your risk tolerance: Investing involves risks, while saving typically has lower risk. Consider how comfortable you are with fluctuations in the value of your assets and the possibility of losing money.
03
Understand the difference between saving and investing: Saving involves putting money aside in low-risk options like savings accounts or certificates of deposit, usually for short-term goals. Investing involves putting money into assets like stocks, bonds, or real estate, in the hope of generating higher returns over a longer period.
04
Consider your time horizon: Saving is suitable for short-term goals (1-5 years) where you need liquidity and stability. Investing is more appropriate for long-term goals (>5 years) where you can afford to ride out market volatility and potentially earn higher returns.
05
Evaluate your current financial situation: Consider factors like your income, expenses, debts, and emergency fund. Saving is crucial to build an emergency fund and cover immediate needs, while investing can help grow your wealth over time.
06
Seek professional advice: If you're unsure about the best approach for your financial situation, consult a financial advisor who can provide personalized guidance.

Who needs saving vs investing which?

01
Individuals with short-term financial goals: If you have a specific expense coming up in the near future, saving would be more suitable to ensure the funds are readily available.
02
People who prioritize stability: If you cannot tolerate any loss of principal or are risk-averse, saving is a safer option as it offers stability and protection of your capital.
03
Those without a solid emergency fund: Saving is essential for building an emergency fund to cover unexpected expenses or income loss.
04
Individuals with a low risk tolerance: If you're uncomfortable with the possibility of losing money or market volatility, saving is a better choice.
05
Individuals with a short time horizon: If your financial goals are within the next 1-5 years, saving is more appropriate due to its liquidity and stability.
06
Those seeking immediate access to funds: Saving provides easy access to your money, unlike investments that may have restrictions or penalties for early withdrawals.

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Saving refers to setting aside money for short-term goals or emergencies with minimal risk, while investing involves purchasing assets like stocks or bonds for long-term growth, which carry more risk.
Typically, individuals and businesses that have income, interest, or investment earnings are required to file taxes related to savings and investments.
To fill out forms related to saving vs investing, you need to report your income, categorize your saving and investment activities, and provide relevant documentation on earnings from both.
The purpose of saving is to provide financial security and liquidity for short-term needs, while investing aims to grow wealth over time through appreciation of assets.
You must report income earned from savings accounts, interest accrued, dividends from investments, capital gains, and any losses incurred.
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