Ideally, all people should save at least ten percent of their income. Once one has saved a certain percentage, the question then becomes where to place their money. For many people that answer is and should be in bonds and securities. Doing so has many advantages.
Beat Inflation
Inflation refers to the rising cost of living. Chances are great that a dollar today will buy more than it does five years from now. Investing in the stock market or another form of savings such as bonds is likely to yield interest in one’s money. The interest can help protect the investor against decreasing economic power from inflation.
Portable Savings
Investment savings, unlike other kinds of savings such as home equity, are portable. One can collect interest from bonds anywhere in the country. This is important if you need to move because you might find better economic opportunities elsewhere. You may also collect your savings even if you decide to move to another country.
Provide Additional Retirement Income
Most people will not be able to pay all of their bills from social security alone. The right investment strategy for your savings can help provide an additional income during retirement. Many stocks and bond pay dividend income. The dividend income is typically paid out in quarterly increments. This money can be used for any purpose you like. People can also dividends before they retire by investing in stocks and bonds. Many people choose to reinvest the income earned in to buying further stocks and bonds. As a result, their savings can grow and expand even when they aren’t actively saving money.
Reduce Taxes
Many forms of invested income are taxed at a lower rate than income earned from salaries. Such income is known as capital gains. People who buy municipal bonds will also often find out from sources like an investor newsletter that the resulting interest is taxed at a lower rate than their other forms of income. The money saved from reduced taxes can then be used to further invest and increase your savings.
Saving money is always an excellent idea. It is equally important to invest the money saved as wisely as possible. Look for investments that let you reduce your taxes and increase your capital.
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