Let’s say, you get an extra $1,000 you weren’t expecting. Maybe you're getting a bonus at work, a birthday gift from a relative, or a payout from the lottery, however you get the money, you want to do something smart with it. When it comes to having excess money, a question needs to be answered. Should you save the money or invest it?

They both have advantages, and a well-rounded financial plan includes both. If you find yourself with extra money and are unsure what to do with it, here’s some advice on whether to save or invest it.

Have an Emergency Fund

If you don’t have one yet, put that extra money to building an emergency fund. Everybody should have an emergency fund, just in case.

The original rule was to have around $1,000, but because of the recent pandemic, people should consider having over six months of expenses saved in their emergency fund for the future.

Whether you need to start an emergency fund or want to grow your current one, Pioneer’s Special Purpose Savings account is perfect for it. You’ll earn a higher rate of interest with it to help build up your emergency fund quickly.

Making a Big Purchase in the Future

Depending on the timeline of an upcoming large expense, you might want to choose to invest your money instead of saving it. Investing your money gives you the opportunity to earn much more profit from it than keeping it in a savings account.

For example, you want to buy a new car in a few years. Rather than keeping the money in a savings account, look for ways to invest it and have your money grow. That way, that money can cover more of the expense than before without extra work on your end.

Investing can help you meet your financial goal quicker, but if the big purchase is coming up soon, you might just want to save your money. Investing could make the money not easily accessible or potentially even lose it.

Invest In Your Retirement Fund

Invest for your future, especially if you are young. Retirement funds let you earn interest over a long period of time, making it possible to retire later in life.

Adding extra money to your retirement fund early in life can pay out big in the future. That money has compound growth, meaning after you get interest paid on it, the total sum grows and you gain interest on the larger amount.

If you have extra money, putting it into a retirement fund like a Pioneer IRA is a smart choice. You can grow that money steadily, making it easier to retire later in life.

Healthy Savings? Then Invest!

If you have a healthy savings account and a strong emergency fund, with no big purchases in the immediate future, then invest your extra money. Depending on the amount of risk you are willing to accept, you could grow that money a great amount, especially if you don’t need to touch it for a long time.

Getting into investments doesn’t need to be scary or complicated. Things like robo-advisors, investing apps, or financial advisors can help you navigate risk levels and find the right investments for you.

Pioneer has a variety of investing and savings options for members. Higher yield savings accounts like our Money Market Savings are great for earning higher interest on a savings account. Looking to grow the money even quicker? Term Certificates let you invest your money to grow for a set period of time and are a useful investment tool.

Learn More About Term Certificates!