Saving and invest may sometimes be used interchangeable due to the fact we engage in both to secure our financial future. In the real sense, saving and investment are entirely two different actions. Saving is the money that is left after spending your disposable income. In saving, you put the money away in a savings account or maybe just at home for future use. You may save for college, a trip or in case of unexpected emergencies
Investment is money committed to property for future income or appreciation. Investment is the process of using your capital, money or savings to buy an asset that has capability of returning the money with profit in the long run. Investments can be in the form of bonds, property, real estates, valuable jewellery among others. As long as an item has the ability to appreciate in value, it can be a reliable investment vehicle. There are two main types of investments, fixed income investment and variable income investments? Fixed income investments have fixed interest rates while variable income investments have fluctuating interest rates.
Saving differs to investments in the purpose of the funds and the period. Savings are made for short period of time to meet minimal financial objectives. Saving period averagely range between one to 5 years. Common saving purposes include buying a phone or a computer and going for a vacation. Saving is good for short term goals. Investing, on the other hand are plans made to meet long term financial goals. You can invest in buying a home, starting a business or buying land among other reason.
Your access to money is limited when it comes to investments. Money savings can come in handy when you have an emergency. With savings you have all the access; you can withdraw part of or all your savings when you wish to. In investment, access to your money will depend on the type of investment you have. Investments in equity mutual funds can allow you to access your investments at any time.
Investments pose a greater risk to your finances compared to savings. Savings in the bank are much safer than at home. The risk or losing your money in the bank is close to zero. While in the bank, your savings can gain a commendable amount of interest depending on the amount. Depending on the investment terms and market situations, your investment may face a risk of possible returns. For example, people invested in stocks may pose a great possibility of losing their money if they are not invested in companies with quality stocks
On a long term basis, investments have a higher rate of returns as compared to your savings. Saving s often have lower interest so you don’t expect the money gained to make any difference. When making a choice between saving and investing, ensure you look at the purpose for your actions. Save your money for short term goals and invest in it for long term goals. Short-term savings may come in handy during financial emergencies.