A Two Pillar Approach to Growing Wealth

Traditional savings programs provide security, they guarantee your money through insignificant returns that barely keep up with inflation. Investments provide the possibility of growing your wealth at a faster pace, but often involve slow starts, sharp declines, and more risk.  Your approach to keeping and growing your wealth needs to be two-pronged. 

Both traditional savings and investments work to support each other as pillars of a healthy approach to managing your money. When it comes to growing your wealth, approach with an eye to diversify within the two pillars. Find appropriate savings options to build a strong foundation for your nest, then opt to reach toward solid investments in order to feather it.

Savings

You are financially secure, carry minimal debt, and enjoy credit cards with low rates. However you are looking to maximize your wealth beyond just good budgeting and moderate spending. Building a traditional plan allows you to set aside money to cover large future expenses such as  a down payment for a house, unanticipated emergencies, and retirement. Traditional savings accounts or money market accounts provide secure places to hold wealth.

Additionally a 529 College Savings Plan sets you up with the tools you need to begin planning for your child’s college education. There are many college scholarships available for underrepresented populations like Latinos, however most scholarships only cover part of the fees and tuition at universities. Establishing a 529 allows you to save money, pay for college, and avoid tax penalties.

A Certificate of Deposit (CD) while a form of investing, is as as secure as a savings account. CDs offer higher yields than traditional savings accounts, however it is not a liquid asset as you will have to pay penalties should you need to withdraw funds.

Investment

While recent market crashes might make you weary of investing in any market, making investments is still the only way to truly grow wealth. All investment comes with risk, but reward accompanies it. In addition to employer supported 401ks, and safe Roth IRAs, investors looking to make smart investments should consider investing in commodities.

Investments in raw materials like oil offer investors a stake in physical commodities offers some protection against inflation. Though commodities are tangible assets, the stability of commodities fluctuates based on world events like war, politics, and natural disaster. Smart investors diversify their holdings varying their investment in oil, energy futures and other precious minerals. Investing in commodities offers a sense of security because you are investing in tangible assets that are less susceptible to intangible factors like inflation, but the investment still carries risk. Smart investors will supplement commodities portfolios with investments in other areas.

Likewise investment in (Real Estate Investment Trusts) REITs offers a chance for investors to put their money into a tangible asset. Though the real estate market has proved volatile in the last decade, REITs offer more security and less work than tactics like flipping properties as the holdings represent multiple properties versus just one.

If your aim is to grow your wealth, your best long term option is to develop both a comprehensive savings strategy and diverse approach to investing. The old adage of placing all of your eggs in one basket holds true here. Protect your wealth by investing it in a variety of places and build a nice safety net of savings to catch those eggs should the baskets break.