When planning your financial wealth, it is vital to understand the differences between saving and investing. In today’s fast-paced market, people are considering price over value; less adhering to the risks it involves and the ROIs it offers. Knowing when and how to save and invest your money can play a huge part in building a sustainable wealth plan. In layman terms, saving is nothing, but some money kept aside from your monthly income. You calculate your expenses from the money you earn and put aside a portion left in a savings account in your bank. This becomes very important to make you financially successful and for your wellbeing.
So, let's understand the big differences between Saving and Investing.
4 Key Differences Between Saving and Investing
1.Purpose
The purpose to save is to fulfill short term goals. On the other hand, to invest is to gain some returns and help in capital formation for long-term goals. While they can share similarities, they are both different. Your idea to save or invest begins with the purpose and the type of assets you decide to go with, in each of the accounts. (Savings or Investments)
2. Time
There is no best time to save, however, if you can manage to save in small amounts every month, you can look forward to fulfilling short-term goals and objectives. Investing is usually done for the future. In order to achieve bigger/long-term goals, and which require a substantial amount of capital, investing can help in doubling that amount quickly for a comfortable life ahead.
3. Risks
Saving does not involve risks as much as compared to investments. Your money is a lot safer in bank accounts than being invested or kept at home. By investing in different platforms such as equity market, stock, bonds or mutual funds you are involving a possible risk of potential returns. But understanding the risks can help you invest in the right growing companies which should not affect your investment for a long-term growth. It is best recommended to seek help from a financial advisor to make such decisions.
4. Returns
Returns are nothing but the value of interest you get on the initial invested amount. The interest rate on a savings account is considered to be lower than on investments. So, if you are looking for a long term to grow your money, say about 5-10 years, quality investments are better than regular savings to achieve higher potential returns.
Which is Better: Saving Or Investing
It completely depends on what you plan to do with your earnings and your financial situation. Saving is the first step to investment. So, if you have saved enough money, you can simultaneously decide to invest as well.
###
Comments