Do any of these financial situations apply to you?
- It makes sense to invest money you don’t plan to use for a long time.
- In some cases, your savings should take priority over investing
You’ll often hear that investing your money is a great way to grow it into a larger sum over time. And that’s true. When you keep your money locked up in a savings account, you earn minimal interest on it. That can make it difficult to grow your savings substantially.
When you invest your money in a brokerage account, on the other hand, you might enjoy a return that’s five, six, or seven times more generous than what your savings account pays you — or more. And while there’s risk involved in investing, there’s also a lot of reward.
But there may come a point when it makes sense to stop investing and focus more on pumping up your savings. Here are three signs you’re in that situation.
1. Your emergency fund isn’t robust enough
As a general rule of thumb, your emergency fund should have enough money to cover three to six months of essential bills. Perhaps you opted for the lower end of that range based on your personal circumstances. But if those circumstances have changed, it could make sense to save more for emergencies — and to do that, you may need to hold off on putting money into an investment account for a period of time.
Say you built a three-month emergency fund when it was just you and your spouse. If you’ve since had a child, you may need or want more money in savings.
Similarly, maybe you based your emergency fund calculations on your old mortgage. If you recently moved and took on more expensive housing payments, your emergency fund should reflect that — and so it pays to make that your priority.
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2. You’ve recently dipped into your emergency fund
The purpose of an emergency fund is to have access …….