Growing up, my parents constantly reminded me to save every penny I could, as saving can get you through tough times. While I am grateful for the financial position saving put me in, I never fully understood the importance of investing. Now, I’m playing catch-up for lost time, interest, and opportunities.
At first, saving and investing seem antithetical, but every wise steward recognizes the need to both save and invest. Although they go hand in hand, they serve different purposes. How much of each you should do depends on your goals and timelines. According to Investopedia, saving is setting aside funds with relatively low risk and easy accessibility, with security as the goal. (Think of checking accounts, money markets, or US treasury bonds.) Investing is buying an asset with the hope that its future value will be significantly more than its original purchase price. (Think of stocks, bonds, real estate, and alternatives.)
Many financial planners recommend saving three to six months of expenses, sometimes called a rainy-day fund. This is money you don’t ever want to use or can’t afford to lose, but if you need to access it quickly, you can. Saving is also an excellent way to plan for short-term expenses or short-term goals, such as saving money to pay for your car insurance or buy a new phone.
Investing is an excellent way to plan for major long-term expenses: future education for children or grandchildren (think college or private school tuition), retirement (it will get here before you know it), estate/legacy planning, and the general future. Generally, the longer you have to live, the more you can invest, and the lower your risk. For example, you can run calculations on the expected cost of a college education for a newborn and make reasonably safe investments to cover the cost eighteen years from now. (For example, if they were to start college in 2042, the estimated yearly cost for a four-year private school is $93,690)
For retirement, however, the opposite is true. Suppose you start investing at 25 or 30 (are you listening, young pastor?), the higher the risk you can tolerate. If you are forty years away from retirement, you can expect several ups and downs in the markets, which you can tolerate and actually benefit from the volatility if you stay invested. However, as you approach retirement age, you will need to lower your risk exposure, as one poor market cycle can hurt your cash flow for life. The goal is not to “die rich,” as Jesus pointed out with the barn builder in Luke 12:16-21, but instead, your goal should be to leave a legacy of faith through financial support for your church and other ministries you care about.
Unless you make plans now to both save and invest, you will not have the blessing of knowing that your family and ministries will be supported long after you are gone. While much of this article has focused on individuals’ saving and investing, this is even more true for churches and ministries to enable the Gospel to continue. Saving and investing are keys to living a financially confident life for yourself, your family, and your church. If you are unsure where or how to get started, the Missouri Baptist Foundation is here to help. Give us a call at (573) 761-0717 and begin your journey today!