Question

Is it better to save $1,000 initially or not save that amount but have $1,000 in profit instead? Also, wouldn’t there be tax on the profit?

Answer 1

Savings is free of tax. If you save $1,000 if would be free of tax.

Profits are always subject to taxes by the tax authorities. Suppose, say if the tax rate is 30%, what happens is that if you don't save, you have to pay to the tax authorities 30% of $1,000 which is $300 and the effective profit in your hands will only be $700.

Savings also brings in many tax benefits to an individual and it is better to do investments rather than holding the money in profits.