We love to save money from our regular income. Since childhood, we have learned that saving money is an important thing to do in life. For a secure financial life-saving cash is necessary. Financial security gives peace to the mind, and with the help of this, we can bear expenses in our low time.
Mainly there are two ways to save money for the future. One is holding, and the other is an investment. Two of these are different forms of saving money. Savings and investments will make you financially independent.
Let’s take a look at how saving and investment are different and which is better for you.
What is Saving?
When you didn’t spend a certain amount from your salary and keep that money aside for your future expense or keep some cash aside from your regular income to bear the future costs is called savings. This money is saved for fulfilling your future requirements when you can’t pay bills at one time. In case of emergency, you can use this money. We can say savings is an emergency fund.
What is Investment?
When we buy assets intending to make more money in return is called investment. Generally, we take a risk to take a good return on investment. There are many ways that you can invest your money like mutual funds, stocks, real estate, etc.
Benefits of Saving
1. Emergency Fund
You may not know what will happen in the next moment, life is uncertain, and a crisis can happen any day. So in this time saving will help you get your financial situation better. If you lost your job or planning to start a business, then saving can help you.
2. Step in to Save Money
Saving is a form of remaining money from your expense. Like you calculated your saving by the difference between your income and expenses. You keep particular money aside from your income in the form of savings. And this fund can be beneficial in an emergency.
Benefits of Investing
1. Grow Your Money
When you invest money, you end up making more money because in the investment, you buy a mutual fund or stocks, and the value of stock increases according to the market, and you end up with a good profit.
2. Achieve Your Financial Goal
If you want to achieve a long-time dream, only investment can fulfill that. For your child, higher education or daughter marriage investment will help you to accomplish these long-time goals.
Difference between Savings and Investment
Let’s take a look at how savings and investment are different. Saving is a money box that we can keep with us, but the investment is a thing that grows with time and benefits you. Here are some essential differences between them.
1. Goal-based Investment
It is always important to fix your goal that can give a clear idea of your needs. Like this, when we have to save money, you can check our financial plan. In this way, you can decide what you need, saving or investing.
For example, if you want to visit Simla, it will cost you around 50,000. To achieve that number, you have to save money from your monthly income. And after 12 months of savings, you will make that money, but on the other hand, if you want to buy a car, you have to invest money because buying a 10,0000 worth vehicle is not an easy thing, so you have to invest some money.
Time plays a huge role in saving and investment. Saving can be done to achieve a small task. The duration of savings is from 1 to 3 years.
But if you want to fulfill a big task like daughter marriage or retirement plan, you have to invest. Investment can be made when you want money after a long time. In this way, investment helps you to achieve long time goals.
3. Risk Factor
When you save money in the form of a fixed deposit, your money will be safe. Saving is the safest investment because they are a fixed amount you can take any time, but when it comes to an asset like a mutual fund and real estate, their price selects according to the market.
The value of your mutual fund change according to market fluctuations. So the investment is a bit risky compared to savings. In this way, saving and investment are different.
4. Return on Investment
Savings will give you very little return like it can provide you 3 to 4% return. But the investment will provide you with a 7 to 9 % return. Like investment in a mutual fund will give you 10 to 15% return. Also, when the market is performing well, you can get up to a 15% return on investment.
Which is Better
Savings and investments are entirely personal choices. If you want to save money for a long time goal, you can go for investment. Savings will give you a tiny amount, but the investment will provide you with growth in your financial state.
So it is your choice you want to save money or invest money.