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Having a little extra money in your possession can come as a great relief but knowing how to use it wisely takes careful consideration. While you may want to let these additional funds reside in your checking or savings account, there are other more beneficial applications you should first consider. What this comes down to is the decision between saving your money or investing it.


Why Save?

Saving your money is usually better than spending it, especially when you have extra and your immediate needs are cared for. One of the best and most prudent things adults should strive to have is a sufficient emergency fund. This often comes in the form of a separate bank or money market account only to be accessed in case of emergency. Even in the current interest rate environment where a savings or money market account is paying zero, safety and liquidity trumps the interest rate.  Knowing that those important funds are safe and accessible is its own reward.  


Why Invest?

If you are not preparing to purchase something specific and already have an emergency fund, investing could be a profitable and productive way to use your extra money. Even individuals who lack investing experience can productively apply their extra funds to grow their wealth; consulting a financial advisor is a wise course of action for those who seek guidance. While there are risks associated with investing, there are also increased opportunities to make your money work harder and grow in value over time.  There are many factors to look at when investing money, and again, talking to a financial advisor is a very smart first step. To summarize, for those who already have an emergency fund, are looking to grow their wealth, and are willing to take some risk, investing your extra money is a good idea.


One or the Other?

Depending on the amount of extra money you have, you may be able to save and invest. Maximizing your contributions to an individual and/or a company sponsored retirement plan and setting aside the remainder of your extra funds to save is one example of a compromising approach. If you are inexperienced with investing, you may choose to start slowly, adding small amounts to your investment accounts and saving the rest until you are more educated and confident.


Securities and Investment Advisory Services offered through Essex Financial Services, Inc., a Registered Investment Advisor, Member FINRA, SIPC.  A subsidiary of Essex Savings Bank. The securities and insurance products offered through Essex Financial Services, Inc. are not a deposit of, or other obligation of, or guaranteed by any bank, or an affiliate of any bank, are not insured by the FDIC or any other agency of the United States, the Bank or an affiliate of the bank and involve investment risk, including the possibility of a loss of the principal amount invested.