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Jiren Hu
ENG-205
Erica Jones
11/7/2017
Contest in Saving and Investment
Saving and investment is an essential concept in the lives of all age groups ranging from
students, the young, and also the retirees. Although saving and investing are two terms that most
people use interchangeably, they play different roles and have various purposes whereby saving
involves restricting personal expenses and keeping the unspent money in custody with the aim of
accumulating it. On the other hand, investment consists in purchasing an asset with the purpose
of generating returns from it after a period while still taking care of the volatility and risk
involved (Webley and Ellen 22). However, both saving and investing are consisting in building
wealth as well as finding financial independence in future which is essential to all people
regardless of the age.
Saving and investing usually have a stated aim which is meeting the unexpected expenses
which can range from covering an emergency financial need to maintaining an individual after a
sudden job loss or retirement. The concepts of saving and investment have different viewpoints
from different age groups. Some people might ask why they are so much pressure in saving and
investing. Some argue that one should not worry about saving and investing if they have enough
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to cater to their financial needs. However, different people save and invest for various reasons
while others have not yet embraced the importance of saving and investing.
Considering that the cost of living has gone too high, some people might not have enough
to spend and still have some left money that they can save or invest. However, regardless of how
the cost of living has risen, the unexpected usually happen at some point of life and thus requiring
individuals to look for the savings and investments they have made in their past (Webley and Ellen,
22). When an emergency occurs in life when an individual has not made any saving or investment,
most people opt for debts which most of the times are not the best solution due to the interest rate
involved while they may also be unavailable according to individual financial history (Zuijderduijn
and Tine, 42). This develops the importance of saving and investment in the lifetime of individuals
regardless of the difficulties which might be associated with saving and investing. Although saving
and investment have uncountable pros, they still have their cons which might hinder some people
from saving. This paper will discuss the pros and cons of saving and investment with the aim of
persuading students, the young, and the retirees the importance of saving and investment. Saving
and investment is an essential milestone in the lives of all age groups in preparing for the future.
Pros in Saving and Investment for Students
Most students have the mentality that saving and investing is for the older generation, but
it is always the best interest of the students to start saving and investing from a young age. A dollar
invested today is worth more than a dollar invested in the future, and thus the sooner a person start
saving and investing the more significant the benefits. Every successful investor begins at an early
age and therefore as a student, one should not think that saving and investing is something that
should not be considered right now (Webley and Ellen, 22). This is because the pros in saving and
investing for students are vast when one has a plan of what he or she is saving for. The advantages
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of saving and investment for students include the opportunity to earn interest on the savings while
having little or no risk. Starting saving early when one is still a student also makes an individual
learn financial discipline. This is because developing a habit of saving early make one spend less
and hence bringing fiscal discipline which is much needed in life.
Starting to invest when one is a student is also beneficial in managing the investment risk better
because this gives the invested money the extra time needed to mitigate the uncertainty in the
market and emerge as a winner. This is because most investments favor those with long investment
horizons which can be achieved by starting to save as a student. Furthermore, saving and investing
as when one is a student is also beneficial in mitigating risks of life better because when one start
saving early, one can make sure that there is adequate financial support in the form of an
emergency fund which is vital in countering any emergencies of life (Shetty, 1). Another
significant benefit of saving as a student is that the money is protected by the banks’ regulating
authorities and thus one does not need to worry about the loss. Investing as a student also creates
the opportunity for building wealth over the long term. Furthermore, starting saving as a student
also has the benefit of creating the chance of avoiding financial mistakes in later life because one
would have learned how to avoid mistakes in financial decisions (Bodie, 88). Therefore, it is not
early for the students to start saving and investing because this is the best way to build up the future
wealth while still reducing the risk of investing at the wrong time.
Pros in Saving and Investment for the Young
The young people can be described as individuals between the 25 to 55 years. This is the
age group which is actually in the best position to join the investing world even with low salaries
and college debts. The pros in saving and investment for the young people are unlimited whereby
one of the major advantages for this age group to save and invest is that the fact that they can
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afford taking more risk in their activities of investment (McWhinnie, 1). This is because as people
move closer to retirement, they tend to run towards risk-free or low-risk investments such as bonds
but the young adults can build portfolios which are more aggressive and hence standing to produce
more substantial gains. Furthermore, the young adults have the advantage of time, and thus their
savings can generate interests which over time can build massive wealth. Considering that the
young adults are tech savvy, they can use this advantage to study and apply the online investing
techniques and tools when making investments (Subha and Shanmugha, 408). There are countless
opportunities offered by the online trading platforms and thus using their knowledge base would
contribute significantly to the success of their investments.
Another major pro in saving and investment for the young adults is that they end up wasting less
money because when individuals are committed to saving, they stick to a budget while still trying
to cut out the unnecessary needs and thus increasing the chances of saving more. Furthermore, the
young adults have the advantage of finding compatible social circles early because joining the
investing world create the opportunity for hanging around with individuals who are financially fit.
The young adults also do not require having vast sums of money to invest, but with small amounts
and building a saving habit, this will add up over time in the long-term (McWhinnie, 1). For
instance, the chart below illustrates the benefits of saving early whereby with as little $50 every
month can yield $600 in a year while $100 in a month can yield $1200 after investing in a year.
Therefore, investing when one is young places the individuals in a position to watch as their money
make more money gradually as illustrated in the chart below.
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Another major pro in saving and investment for the young adults is the fact that this forms
the cornerstone for building personal retirement plans (Royal London, 1). This is because
accomplishing to save for retirement at an early age; this increases the opportunity of attaining
financial independence at a younger age significantly. In fact, young individuals have the potential
of making a massive impact on their retirement income because they have the advantage of time
which the older people don't have. For example, the chart below from JP Morgan indicate that a
young adult who invests $5,000 yearly between 25 and 35 years of age can earn $602,070 at the
age of 65 calculating the returns at 7 % annually. This illustrates the benefits of saving and
investment for the young adults over a more considerable period as shown below (McWhinnie, 1).
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The pros in saving and investment for the young adults cannot be limited just for the benefit
of their retirements (Shetty, 1). This is because many investments provide income throughout the
investment life which creates a major opportunity for the young adults to increase their future
wages.
Pros in Saving and Investment for the Retirees
Most retirees have various sources of income including personal saving and social security.
Another major advantage in saving and investment for the young adults is the fact that this forms
the cornerstone for building individual retirement plans. For the retirees, it is imperative to make
the best use of the retirement benefits for the purpose of keeping the tax liability at bay while still
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having a regular source of income. Among the major pros in saving and investment for the retirees
include the fact that their health becomes a major priority in the later years. Since the health
conditions cannot be guaranteed, it is crucial for the retirees to have savings set aside so that they
can meet any medical emergency that might affect them (Bodie, 136). Another pro in saving and
investment for the retirees involves the importance of having an emergency fund which can cover
various unexpected expenses other than their health needs.
Retiring does not imply that the individual ceases to have expenditures because the grandchildren
and other family members might require financial help whereby having a savings and investment
plan would significantly be essential in meeting such needs (Inker and Martin 128). Furthermore,
the retirees also require some extra savings and investments that would support the lifestyle they
would like to have because they also need to live well in old age. They occasionally need to treat
themselves with a trip away, a meal out, or a celebration with family and friends and thus it is of
great importance for them to save even after retirement. The other pro in saving and investing for
the retirees is that they need to save for sinking funds which involve the amount set aside to meet
future repairs or improvements of their home, car, or other possessions. Therefore, saving and
investing for retirees is of great importance in helping this older generation to stop relying on their
emergency fund each and every time they have an expense to meet.
The cons in saving and investment for students, the young, and the retirees
The decision of saving and investing is both a personal and a financial choice, and very
often some people may feel like saving is a luxury particularly when they don’t feel like they can
afford to save regularly. However, the truth is that all people can afford to save and invest
regardless of whatever little amount they can provide, but there are reasons which many people
who don’t save or invest give to support their decision. Among the cons that people cited for not
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saving or investing is that saving is usually slow and steady while on the other hand, one cannot
always predict the gains from an investment (Arvidson et al., 12). This may be true because savings
yields low-interest rates, mainly when the amount saved is little while predicting the expected
gains from an investment may be hard due to forces such as inflation and unfavorable economic
conditions. Although saving is significantly considered safe, the slow growth pace risk the savings
being consumed by inflation because when the rate of interest is lower than the inflation rate, the
saved money might be lost (Listing, 95). Furthermore, the fluctuations in the value of an
investment can be sudden and dramatic but knowing the period of time one intends to invest is
essential reducing the risk that might hinder the investment goal.
Making investment decisions which would result in a better gain might also be difficult which
also hinder some people from investing. Considering that even some professional fund managers
might not be able to guarantee their clients the best returns even after costs, this makes many
people perceive investing as a complicated and time-consuming task.
The withdrawal limitations after saving or investing are also cited as a con in saving and
investment whereby those who do not save argue that this is limiting how a person wants to spend
the saved money. However, this is not a major concern unless to those who have the habit of
covering the unexpected expenses using the savings. It is also essential to refute some of the
common reasons why people choose not to invest or save their money (Arvidson et al., 12). Some
people might say they have everything they need and thus there is no need for saving which is not
a good habit because some people might end up spending money for things which are unnecessary.
Living in the moment is another primary reason why people choose not to save particularly the
students and the youths, but this is also a major financial mistake because it is critical to saving for
the unexpected. Therefore, the cons of saving and investments cannot match the pros and thus,
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saving and investment is an essential milestone in the lives of all age groups in preparing for the
future.
Conclusion
After reviewing the pros in saving for students, the young, and the retirees as well as the
cons which make people choose not to save or invest, the pros outdo by far the cons which support
the thesis that saving and investment are an important milestone in the lives of all age groups in
preparing for the future. Every successful investor starts at an early age and thus as a student, one
should not think that saving and investing is something that should not be considered right now
because this is the time they can develop the saving habit (Lustig, 55). The young people are
actually in the best position to join the investing world even with low salaries and college debts
because they have the advantage of time which the retirees do have.
The pros in saving and investment for the young people are unlimited whereby one of the
significant advantages for this age group to save and invest is that the fact that they can afford
taking more risk in their activities of investment. Savings and expenditures for the young adults
are essential in forming the cornerstone for building personal retirement plans. Although saving
and investment might have some cons, the pros are unlimited for all the age groups be they
students, the young, or the retirees. Therefore, unless people have vast sums of money, the only
way to accumulate wealth is through saving and investment. Thus, saving and investment are an
important milestone in the lives of all age groups in preparing for the future.
Work Cited
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Arvidson, Malin, et al. "Valuing the social? The nature and controversies of measuring social
return on investment (SROI)." Voluntary Sector Review 4.1 (2013): 3-18.
Bodie, Zvi. Investments. McGraw-Hill, 2013.
Inker, Ben, and Martin Tarlie. "Investing for Retirement: The Defined Contribution Challenge."
White paper, GMO LLC (2014).
Lustig, Yoram. FT Guide to Saving and Investing for Retirement: The definitive handbook to
securing your financial future. Pearson UK, 2016.
McWhinnie, Eric. “Reasons Young People Should Start Saving for Retirement Now.” August
12, 2016. Web 1. Retrieved from:
https://www.cheatsheet.com/money-career/3-big-
benefits-of-saving-early-for-retirement.html/?a=viewall
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Retrieved
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advantages-of- regular-saving-and-investing/
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Shetty, Adhil. “Financial Planning: The importance of saving and investing.” July 20, 2016. Web
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