“Time to save money is when you have some” ~Anonymous. The hard-earned money after tirelessly working for a daily 9 to 5 job, can’t be spent easily without giving much thought. Even though there are many shining options available to have our money doubled or invest in some mutual funds, we tend to think ten times before selecting one. It starts from saving a tiny bit from the monthly salary and later, choosing whether to keep on saving or invest in some full-proof investment plans. The second dilemma which might cross our minds is “Does Investment and savings make much of a difference?”. “Aren’t they both alike, after calculating the risk and investment?” Let’s check all these things in our topic Investment vs Savings.
Well, even though both of these options account for a good financial foundation, they are both different. Savings have a potentially low return with less amount of risk, on the other hand, investments have a 50-50% probability of profit or loss, depending on the scheme you have chosen. And a combination of these both might lead you to a perfect financially balanced future. Every consumer needs to know when is the right time to save or invest considering a few situations.
Difference between Investments and Savings
|Definition||You invest your savings in some plans for gaining profit. Also, known as long-term savings.||The amount left out of your salary after spending your monthly expenses.|
|Risk||Low to high (As per scheme selected)||Low (If savings bank is trusted)|
|Where to invest?||Stocks, mutual funds, ETFs, options, and a few more types of investment.||Banks|
|Example||Money spent by shareholders to purchase some shares of a company.||Savings for Education, stylish clothes, gifts, etc.|
Savings is a good option when you want your money to be in one place and available anytime you need it in urgency. Also, savers tend to save their money in a low-risk bank account where they can maximize their money hence, they should opt for the highest annual percentage yield savings account available. Contrary to savings, Investments have a certain level of risk involved and are available in the form of mutual funds, stocks, exchange funds, etc. Investments involve a third person, referred to as a “broker” who guides you to buy or sell as per best fit.
“You must learn to save first and spend afterwards!” ~John Poole
- Savings can be done once you’re done with your monthly expenses and paying bills, which means it is the income left after all the works at your hands are done and you’re collecting it monthly, just like how a pond eventually gets filled with water droplets, your cash will also get increased in amount in a long time.
- Savings have zero risk and they act as an emergency solver. If you have already saved some money, you can easily get away from an unannounced crisis. Kind of a win-win situation.
- It can be a short-term or long-termed goal that can be kept as cash or deposit in your savings account.
Tips for savings
- Keep a track of your expenses
- Differentiate between what you want and what you need
- Try keeping the use of credit cards or other methods at minimum
- Cut down expenses on services if possible
- Try saving on bills by cutting down energy consumption like electricity and fuel.
“If you want to be wealthy, think of saving as well as getting at the same time.”
- Investments are like getting levelled up in the Mario game, you will get more coins but after crossing all the jumps and falls. You might think it’s impossible, but you eventually make it.
- Investments give much more return than savings accounts or fixed deposits.
- You may get high or low returns depending on the scheme and conditions of the share market if it’s regarding stocks.
- Acts as an aid in achieving your dreams.
- Make a plan before investing
- Understand the risk and how much loss you can bear and invest accordingly
- Study the stock market before investing to reduce risk
- Try different types of investment for diversity and not depend on one only
- Invest regularly and not all at once to avoid losing all of it
Even though savings don’t have any return to offer they come with Zero risk, your money is saturated at a single place, which you can redeem anytime. Savings are best for people who choose deposit funds over mutual funds and are not willing to take high risks. On the other hand, investments are mended to make a profit once considering all the facts. If a person is interested in investments, they can even hire an adviser who has adequate knowledge about investments and get their money invested in the right stocks and funds. After all, to take good care of any family, a person can’t solely depend on a single source of income. There are many hidden options out there to be financially better, Savings and Investments are one of those in its lists. I hope this topic Investment vs Savings definitely helped you to understand a few concepts.